Correlation Between Aptiv PLC and Volaris

Can any of the company-specific risk be diversified away by investing in both Aptiv PLC and Volaris 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 Volaris into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aptiv PLC and Volaris, you can compare the effects of market volatilities on Aptiv PLC and Volaris 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 Volaris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and Volaris.

Diversification Opportunities for Aptiv PLC and Volaris

-0.78

Correlation Coefficient

Aptiv PLC  Volaris

Pay attention - limited upside

The 3 months correlation between Aptiv and Volaris is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris 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 Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Volaris go up and down completely randomly.

Pair Corralation between Aptiv PLC and Volaris

Given the investment horizon of 90 days Aptiv PLC is expected to generate 0.71 times more return on investment than Volaris. However, Aptiv PLC is 1.41 times less risky than Volaris. It trades about 0.24 of its potential returns per unit of risk. Volaris is currently generating about -0.13 per unit of risk. If you would invest  5,740  in Aptiv PLC on October 10, 2024 and sell it today you would earn a total of  340.00  from holding Aptiv PLC or generate 5.92% return on investment over 90 days.

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

Aptiv PLC  vs.  Volaris

Aptiv PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Volaris

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aptiv PLC and Volaris

The main advantage of trading using opposite Aptiv PLC and Volaris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptiv PLC position performs unexpectedly, Volaris 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 Volaris will offset losses from the drop in Volaris' long position.

The idea behind Aptiv PLC and Volaris 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.