Correlation Between Aptiv PLC and 191216DK3

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Can any of the company-specific risk be diversified away by investing in both Aptiv PLC and 191216DK3 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 Aptiv PLC and 191216DK3 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aptiv PLC and COCA COLA CO, you can compare the effects of market volatilities on Aptiv PLC and 191216DK3 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 Aptiv PLC with a short position of 191216DK3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and 191216DK3.

Diversification Opportunities for Aptiv PLC and 191216DK3

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Aptiv and 191216DK3 is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and COCA COLA CO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A CO and Aptiv 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 Aptiv PLC are associated (or correlated) with 191216DK3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A CO has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and 191216DK3 go up and down completely randomly.

Pair Corralation between Aptiv PLC and 191216DK3

Given the investment horizon of 90 days Aptiv PLC is expected to under-perform the 191216DK3. In addition to that, Aptiv PLC is 4.76 times more volatile than COCA COLA CO. It trades about -0.11 of its total potential returns per unit of risk. COCA COLA CO is currently generating about -0.01 per unit of volatility. If you would invest  8,388  in COCA COLA CO on September 1, 2024 and sell it today you would lose (88.00) from holding COCA COLA CO or give up 1.05% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy96.83%
ValuesDaily Returns

Aptiv PLC  vs.  COCA COLA CO

 Performance 
       Timeline  
Aptiv PLC 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
COCA A CO 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COCA COLA CO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 191216DK3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aptiv PLC and 191216DK3 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aptiv PLC and 191216DK3

The main advantage of trading using opposite Aptiv PLC and 191216DK3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptiv PLC position performs unexpectedly, 191216DK3 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 191216DK3 will offset losses from the drop in 191216DK3's long position.
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The idea behind Aptiv PLC and COCA COLA CO 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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