Correlation Between China Aircraft and Aptiv PLC

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

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

Diversification Opportunities for China Aircraft and Aptiv PLC

0.54

Correlation Coefficient

China Aircraft  Aptiv PLC

Very weak diversification

The 3 months correlation between China and Aptiv is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding China Aircraft Leasing and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC and China Aircraft 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 China Aircraft Leasing are associated (or correlated) with Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of China Aircraft i.e., China Aircraft and Aptiv PLC go up and down completely randomly.

Pair Corralation between China Aircraft and Aptiv PLC

Assuming the 90 days horizon China Aircraft Leasing is expected to generate 0.32 times more return on investment than Aptiv PLC. However, China Aircraft Leasing is 3.11 times less risky than Aptiv PLC. It trades about -0.13 of its potential returns per unit of risk. Aptiv PLC is currently generating about -0.07 per unit of risk. If you would invest  43.00  in China Aircraft Leasing on October 4, 2024 and sell it today you would lose (3.00) from holding China Aircraft Leasing or give up 6.98% of portfolio value over 90 days.

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

China Aircraft Leasing  vs.  Aptiv PLC

China Aircraft Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Aircraft Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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

Pair Trading with China Aircraft and Aptiv PLC

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

The idea behind China Aircraft Leasing and Aptiv PLC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..