Correlation Between Autoliv and Continental Aktiengesellscha
Can any of the company-specific risk be diversified away by investing in both Autoliv and Continental Aktiengesellscha 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 Autoliv and Continental Aktiengesellscha into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autoliv and Continental Aktiengesellschaft, you can compare the effects of market volatilities on Autoliv and Continental Aktiengesellscha 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 Autoliv with a short position of Continental Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autoliv and Continental Aktiengesellscha.
Diversification Opportunities for Autoliv and Continental Aktiengesellscha
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Autoliv and Continental is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Continental Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Aktiengesellscha and Autoliv 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 Autoliv are associated (or correlated) with Continental Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Aktiengesellscha has no effect on the direction of Autoliv i.e., Autoliv and Continental Aktiengesellscha go up and down completely randomly.
Pair Corralation between Autoliv and Continental Aktiengesellscha
Considering the 90-day investment horizon Autoliv is expected to under-perform the Continental Aktiengesellscha. But the stock apears to be less risky and, when comparing its historical volatility, Autoliv is 2.02 times less risky than Continental Aktiengesellscha. The stock trades about -0.06 of its potential returns per unit of risk. The Continental Aktiengesellschaft is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,426 in Continental Aktiengesellschaft on November 28, 2024 and sell it today you would earn a total of 70.00 from holding Continental Aktiengesellschaft or generate 0.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autoliv vs. Continental Aktiengesellschaft
Performance |
| Timeline |
| Autoliv |
| Continental Aktiengesellscha |
Autoliv and Continental Aktiengesellscha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autoliv and Continental Aktiengesellscha
The main advantage of trading using opposite Autoliv and Continental Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv position performs unexpectedly, Continental Aktiengesellscha 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 Continental Aktiengesellscha will offset losses from the drop in Continental Aktiengesellscha's long position.The idea behind Autoliv and Continental Aktiengesellschaft 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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