Correlation Between Aptiv PLC and DENSO P

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

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

Diversification Opportunities for Aptiv PLC and DENSO P

-0.72

Correlation Coefficient

Aptiv PLC  DENSO P

Pay attention - limited upside

The 3 months correlation between Aptiv and DENSO is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and DENSO P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO P ADR 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 DENSO P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO P ADR has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and DENSO P go up and down completely randomly.

Pair Corralation between Aptiv PLC and DENSO P

Assuming the 90 days horizon Aptiv PLC is expected to generate 1.42 times more return on investment than DENSO P. However, Aptiv PLC is 1.42 times more volatile than DENSO P ADR. It trades about 0.25 of its potential returns per unit of risk. DENSO P ADR is currently generating about -0.33 per unit of risk. If you would invest  4,958  in Aptiv PLC on September 22, 2024 and sell it today you would earn a total of  529.00  from holding Aptiv PLC or generate 10.67% 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.  DENSO P ADR

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

DENSO P ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DENSO P ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DENSO P is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aptiv PLC and DENSO P

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

The idea behind Aptiv PLC and DENSO P ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.