Correlation Between Continental Aktiengesellscha and Autoliv

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

By analyzing existing cross correlation between Continental Aktiengesellschaft and Autoliv, you can compare the effects of market volatilities on Continental Aktiengesellscha and Autoliv 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 Continental Aktiengesellscha with a short position of Autoliv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental Aktiengesellscha and Autoliv.

Diversification Opportunities for Continental Aktiengesellscha and Autoliv

0.25

Correlation Coefficient

Continental Aktiengesellscha  Autoliv

Modest diversification

The 3 months correlation between Continental and Autoliv is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Continental Aktiengesellschaft and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Continental Aktiengesellscha 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 Continental Aktiengesellschaft are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of Continental Aktiengesellscha i.e., Continental Aktiengesellscha and Autoliv go up and down completely randomly.

Pair Corralation between Continental Aktiengesellscha and Autoliv

Assuming the 90 days horizon Continental Aktiengesellschaft is expected to generate 2.11 times more return on investment than Autoliv. However, Continental Aktiengesellscha is 2.11 times more volatile than Autoliv. It trades about 0.08 of its potential returns per unit of risk. Autoliv is currently generating about -0.05 per unit of risk. If you would invest  6,514  in Continental Aktiengesellschaft on December 4, 2024 and sell it today you would earn a total of  813.00  from holding Continental Aktiengesellschaft or generate 12.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Continental Aktiengesellschaft  vs.  Autoliv

Continental Aktiengesellscha

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Aktiengesellschaft are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Continental Aktiengesellscha reported solid returns over the last few months and may actually be approaching a breakup point.

Autoliv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Autoliv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Autoliv is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Continental Aktiengesellscha and Autoliv

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

The idea behind Continental Aktiengesellschaft and Autoliv 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.