Correlation Between Adient PLC and Holley
Can any of the company-specific risk be diversified away by investing in both Adient PLC and Holley 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 Adient PLC and Holley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adient PLC and Holley Inc, you can compare the effects of market volatilities on Adient PLC and Holley 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 Adient PLC with a short position of Holley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adient PLC and Holley.
Diversification Opportunities for Adient PLC and Holley
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adient and Holley is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and Holley Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holley Inc and Adient 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 Adient PLC are associated (or correlated) with Holley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holley Inc has no effect on the direction of Adient PLC i.e., Adient PLC and Holley go up and down completely randomly.
Pair Corralation between Adient PLC and Holley
Given the investment horizon of 90 days Adient PLC is expected to under-perform the Holley. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 1.19 times less risky than Holley. The stock trades about -0.14 of its potential returns per unit of risk. The Holley Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 274.00 in Holley Inc on August 26, 2024 and sell it today you would earn a total of 14.00 from holding Holley Inc or generate 5.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adient PLC vs. Holley Inc
Performance |
| Timeline |
| Adient PLC |
| Holley Inc |
Adient PLC and Holley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adient PLC and Holley
The main advantage of trading using opposite Adient PLC and Holley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adient PLC position performs unexpectedly, Holley 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 Holley will offset losses from the drop in Holley's long position.The idea behind Adient PLC and Holley Inc 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.| Holley vs. Dorman Products | Holley vs. Monro Muffler Brake | Holley vs. Standard Motor Products | Holley vs. Stoneridge |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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