Correlation Between Autoliv and Standard
Can any of the company-specific risk be diversified away by investing in both Autoliv and Standard 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 Standard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autoliv and Standard Motor Products, you can compare the effects of market volatilities on Autoliv and Standard 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 Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autoliv and Standard.
Diversification Opportunities for Autoliv and Standard
Modest diversification
The 3 months correlation between Autoliv and Standard is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Autoliv and Standard Motor Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Motor Products 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 Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Motor Products has no effect on the direction of Autoliv i.e., Autoliv and Standard go up and down completely randomly.
Pair Corralation between Autoliv and Standard
Considering the 90-day investment horizon Autoliv is expected to generate 5.1 times less return on investment than Standard. But when comparing it to its historical volatility, Autoliv is 2.26 times less risky than Standard. It trades about 0.07 of its potential returns per unit of risk. Standard Motor Products is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,842 in Standard Motor Products on August 30, 2024 and sell it today you would earn a total of 436.00 from holding Standard Motor Products or generate 15.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Autoliv vs. Standard Motor Products
Performance |
| Timeline |
| Autoliv |
| Standard Motor Products |
Autoliv and Standard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autoliv and Standard
The main advantage of trading using opposite Autoliv and Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autoliv position performs unexpectedly, Standard 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 Standard will offset losses from the drop in Standard's long position.The idea behind Autoliv and Standard Motor Products 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.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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