Correlation Between Aptiv PLC and Compagnie Plastic

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

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

Diversification Opportunities for Aptiv PLC and Compagnie Plastic

-0.11

Correlation Coefficient

Aptiv PLC  Compagnie Plastic

Good diversification

The 3 months correlation between Aptiv and Compagnie is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Compagnie Plastic Omnium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Plastic Omnium 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 Compagnie Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Plastic Omnium has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Compagnie Plastic go up and down completely randomly.

Pair Corralation between Aptiv PLC and Compagnie Plastic

Assuming the 90 days horizon Aptiv PLC is expected to under-perform the Compagnie Plastic. But the stock apears to be less risky and, when comparing its historical volatility, Aptiv PLC is 1.09 times less risky than Compagnie Plastic. The stock trades about -0.03 of its potential returns per unit of risk. The Compagnie Plastic Omnium is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,239  in Compagnie Plastic Omnium on September 23, 2024 and sell it today you would lose (267.00) from holding Compagnie Plastic Omnium or give up 21.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Aptiv PLC  vs.  Compagnie Plastic Omnium

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.

Compagnie Plastic Omnium

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Plastic Omnium are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Compagnie Plastic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aptiv PLC and Compagnie Plastic

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

The idea behind Aptiv PLC and Compagnie Plastic Omnium 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 Global Correlations module to find global opportunities by holding instruments from different markets.