Correlation Between Autoliv and Garrett Motion
Can any of the company-specific risk be diversified away by investing in both Autoliv and Garrett Motion 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 Garrett Motion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autoliv and Garrett Motion, you can compare the effects of market volatilities on Autoliv and Garrett Motion 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 Garrett Motion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autoliv and Garrett Motion.
Diversification Opportunities for Autoliv and Garrett Motion
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Autoliv and Garrett is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Garrett Motion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garrett Motion 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 Garrett Motion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garrett Motion has no effect on the direction of Autoliv i.e., Autoliv and Garrett Motion go up and down completely randomly.
Pair Corralation between Autoliv and Garrett Motion
Considering the 90-day investment horizon Autoliv is expected to under-perform the Garrett Motion. But the stock apears to be less risky and, when comparing its historical volatility, Autoliv is 1.12 times less risky than Garrett Motion. The stock trades about -0.1 of its potential returns per unit of risk. The Garrett Motion is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 890.00 in Garrett Motion on August 24, 2024 and sell it today you would lose (70.00) from holding Garrett Motion or give up 7.87% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autoliv vs. Garrett Motion
Performance |
| Timeline |
| Autoliv |
| Garrett Motion |
Autoliv and Garrett Motion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autoliv and Garrett Motion
The main advantage of trading using opposite Autoliv and Garrett Motion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv position performs unexpectedly, Garrett Motion 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 Garrett Motion will offset losses from the drop in Garrett Motion's long position.The idea behind Autoliv and Garrett Motion 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.| Garrett Motion vs. Gentex | Garrett Motion vs. Adient PLC | Garrett Motion vs. Autoliv | Garrett Motion vs. Fox Factory Holding |
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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