Correlation Between Aptiv PLC and Tesla

Can any of the company-specific risk be diversified away by investing in both Aptiv PLC and Tesla at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aptiv PLC and Tesla into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aptiv PLC and Tesla Inc, you can compare the effects of market volatilities on Aptiv PLC and Tesla and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aptiv PLC with a short position of Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and Tesla.

Diversification Opportunities for Aptiv PLC and Tesla

-0.51

Correlation Coefficient

Aptiv PLC  Tesla

Excellent diversification

The 3 months correlation between Aptiv and Tesla is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc and Aptiv PLC is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aptiv PLC are associated (or correlated) with Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Tesla go up and down completely randomly.

Pair Corralation between Aptiv PLC and Tesla

Given the investment horizon of 90 days Aptiv PLC is expected to generate 0.37 times more return on investment than Tesla. However, Aptiv PLC is 2.72 times less risky than Tesla. It trades about 0.04 of its potential returns per unit of risk. Tesla Inc is currently generating about -0.13 per unit of risk. If you would invest  6,011  in Aptiv PLC on December 28, 2024 and sell it today you would earn a total of  214.00  from holding Aptiv PLC or generate 3.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Aptiv PLC  vs.  Tesla Inc

Aptiv PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aptiv PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aptiv PLC is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tesla Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tesla Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aptiv PLC and Tesla

The main advantage of trading using opposite Aptiv PLC and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptiv PLC position performs unexpectedly, Tesla can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tesla will offset losses from the drop in Tesla's long position.

The idea behind Aptiv PLC and Tesla Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.