Correlation Between Xpeng and Aptiv PLC

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

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

Diversification Opportunities for Xpeng and Aptiv PLC

0.51

Correlation Coefficient

Xpeng  Aptiv PLC

Very weak diversification

The 3 months correlation between Xpeng and Aptiv is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Xpeng Inc and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC and Xpeng 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 Xpeng Inc are associated (or correlated) with Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Xpeng i.e., Xpeng and Aptiv PLC go up and down completely randomly.

Pair Corralation between Xpeng and Aptiv PLC

Given the investment horizon of 90 days Xpeng Inc is expected to generate 2.91 times more return on investment than Aptiv PLC. However, Xpeng is 2.91 times more volatile than Aptiv PLC. It trades about 0.22 of its potential returns per unit of risk. Aptiv PLC is currently generating about 0.04 per unit of risk. If you would invest  1,187  in Xpeng Inc on December 28, 2024 and sell it today you would earn a total of  885.00  from holding Xpeng Inc or generate 74.56% return on investment over 90 days.

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

Xpeng Inc  vs.  Aptiv PLC

Xpeng Inc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xpeng Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Xpeng showed solid returns over the last few months and may actually be approaching a breakup point.

Aptiv PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aptiv PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aptiv PLC is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Xpeng and Aptiv PLC

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

The idea behind Xpeng Inc and Aptiv 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.