Correlation Between Motorcar Parts and Autoliv

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

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

Diversification Opportunities for Motorcar Parts and Autoliv

0.19

Correlation Coefficient

Motorcar Parts  Autoliv

Average diversification

The 3 months correlation between Motorcar and Autoliv is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Motorcar Parts 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 Motorcar Parts of 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 Motorcar Parts i.e., Motorcar Parts and Autoliv go up and down completely randomly.

Pair Corralation between Motorcar Parts and Autoliv

Given the investment horizon of 90 days Motorcar Parts of is expected to generate 3.13 times more return on investment than Autoliv. However, Motorcar Parts is 3.13 times more volatile than Autoliv. It trades about 0.16 of its potential returns per unit of risk. Autoliv is currently generating about 0.01 per unit of risk. If you would invest  729.00  in Motorcar Parts of on November 28, 2024 and sell it today you would earn a total of  344.00  from holding Motorcar Parts of or generate 47.19% return on investment over 90 days.

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

Motorcar Parts of  vs.  Autoliv

Motorcar Parts

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motorcar Parts of are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Motorcar Parts sustained solid returns over the last few months and may actually be approaching a breakup point.

Autoliv

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Autoliv are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Motorcar Parts and Autoliv

The main advantage of trading using opposite Motorcar Parts and Autoliv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorcar Parts 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 Motorcar Parts of 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.