Correlation Between Dana and Autoliv
Can any of the company-specific risk be diversified away by investing in both Dana and Autoliv 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 Dana and Autoliv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dana Inc and Autoliv, you can compare the effects of market volatilities on Dana and Autoliv 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 Dana with a short position of Autoliv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana and Autoliv.
Diversification Opportunities for Dana and Autoliv
Good diversification
The 3 months correlation between Dana and Autoliv is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Dana 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 Dana Inc are associated (or correlated) with Autoliv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autoliv has no effect on the direction of Dana i.e., Dana and Autoliv go up and down completely randomly.
Pair Corralation between Dana and Autoliv
Considering the 90-day investment horizon Dana Inc is expected to generate 2.03 times more return on investment than Autoliv. However, Dana is 2.03 times more volatile than Autoliv. It trades about 0.31 of its potential returns per unit of risk. Autoliv is currently generating about 0.01 per unit of risk. If you would invest 1,292 in Dana Inc on November 18, 2024 and sell it today you would earn a total of 343.00 from holding Dana Inc or generate 26.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dana Inc vs. Autoliv
Performance |
| Timeline |
| Dana Inc |
| Autoliv |
Dana and Autoliv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dana and Autoliv
The main advantage of trading using opposite Dana and Autoliv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana position performs unexpectedly, Autoliv 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 Autoliv will offset losses from the drop in Autoliv's long position.The idea behind Dana Inc and Autoliv 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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