Correlation Between ECARX Holdings and Adient PLC

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

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

Diversification Opportunities for ECARX Holdings and Adient PLC

0.14

Correlation Coefficient

ECARX Holdings  Adient PLC

Average diversification

The 3 months correlation between ECARX and Adient is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ECARX Holdings Class and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC and ECARX Holdings 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 ECARX Holdings Class are associated (or correlated) with Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of ECARX Holdings i.e., ECARX Holdings and Adient PLC go up and down completely randomly.

Pair Corralation between ECARX Holdings and Adient PLC

Considering the 90-day investment horizon ECARX Holdings Class is expected to generate 1.71 times more return on investment than Adient PLC. However, ECARX Holdings is 1.71 times more volatile than Adient PLC. It trades about 0.06 of its potential returns per unit of risk. Adient PLC is currently generating about -0.03 per unit of risk. If you would invest  178.00  in ECARX Holdings Class on September 15, 2024 and sell it today you would earn a total of  19.00  from holding ECARX Holdings Class or generate 10.67% return on investment over 90 days.

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

ECARX Holdings Class  vs.  Adient PLC

ECARX Holdings Class

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECARX Holdings Class are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, ECARX Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adient PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ECARX Holdings and Adient PLC

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

The idea behind ECARX Holdings Class and Adient 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.