Correlation Between Aptiv PLC and Wabash National

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

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

Diversification Opportunities for Aptiv PLC and Wabash National

-0.33

Correlation Coefficient

Aptiv PLC  Wabash National

Very good diversification

The 3 months correlation between Aptiv and Wabash is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Wabash National go up and down completely randomly.

Pair Corralation between Aptiv PLC and Wabash National

Given the investment horizon of 90 days Aptiv PLC is expected to generate 1.12 times more return on investment than Wabash National. However, Aptiv PLC is 1.12 times more volatile than Wabash National. It trades about -0.05 of its potential returns per unit of risk. Wabash National is currently generating about -0.1 per unit of risk. If you would invest  7,909  in Aptiv PLC on September 20, 2024 and sell it today you would lose (2,208) from holding Aptiv PLC or give up 27.92% of portfolio value over 90 days.

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

Aptiv PLC  vs.  Wabash National

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 fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Aptiv PLC and Wabash National

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

The idea behind Aptiv PLC and Wabash National 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.