Correlation Between Turning Point and Adient PLC

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

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

Diversification Opportunities for Turning Point and Adient PLC

-0.6

Correlation Coefficient

Turning Point  Adient PLC

Excellent diversification

The 3 months correlation between Turning and Adient is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC and Turning Point 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 Turning Point Brands 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 Turning Point i.e., Turning Point and Adient PLC go up and down completely randomly.

Pair Corralation between Turning Point and Adient PLC

Considering the 90-day investment horizon Turning Point Brands is expected to generate 0.92 times more return on investment than Adient PLC. However, Turning Point Brands is 1.09 times less risky than Adient PLC. It trades about 0.21 of its potential returns per unit of risk. Adient PLC is currently generating about -0.14 per unit of risk. If you would invest  4,456  in Turning Point Brands on October 23, 2024 and sell it today you would earn a total of  1,302  from holding Turning Point Brands or generate 29.22% return on investment over 90 days.

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

Turning Point Brands  vs.  Adient PLC

Turning Point Brands

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Turning Point sustained 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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Turning Point and Adient PLC

The main advantage of trading using opposite Turning Point and Adient PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Turning Point 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 Turning Point Brands 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.