Correlation Between Aptiv PLC and Gentex

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

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

Diversification Opportunities for Aptiv PLC and Gentex

-0.68

Correlation Coefficient

Aptiv PLC  Gentex

Excellent diversification

The 3 months correlation between Aptiv and Gentex is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Gentex go up and down completely randomly.

Pair Corralation between Aptiv PLC and Gentex

Assuming the 90 days horizon Aptiv PLC is expected to generate 1.16 times more return on investment than Gentex. However, Aptiv PLC is 1.16 times more volatile than Gentex. It trades about 0.14 of its potential returns per unit of risk. Gentex is currently generating about -0.04 per unit of risk. If you would invest  5,250  in Aptiv PLC on September 23, 2024 and sell it today you would earn a total of  237.00  from holding Aptiv PLC or generate 4.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Aptiv PLC  vs.  Gentex

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.

Gentex

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gentex are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Gentex 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 Gentex

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

The idea behind Aptiv PLC and Gentex 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..