Correlation Between DENSO and Autoliv
Can any of the company-specific risk be diversified away by investing in both DENSO 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 DENSO and Autoliv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DENSO and Autoliv, you can compare the effects of market volatilities on DENSO 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 DENSO with a short position of Autoliv. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO and Autoliv.
Diversification Opportunities for DENSO and Autoliv
Very weak diversification
The 3 months correlation between DENSO and Autoliv is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding DENSO and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and DENSO 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 DENSO 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 DENSO i.e., DENSO and Autoliv go up and down completely randomly.
Pair Corralation between DENSO and Autoliv
Assuming the 90 days horizon DENSO is expected to generate 43.46 times more return on investment than Autoliv. However, DENSO is 43.46 times more volatile than Autoliv. It trades about 0.17 of its potential returns per unit of risk. Autoliv is currently generating about 0.04 per unit of risk. If you would invest 5,441 in DENSO on August 29, 2024 and sell it today you would lose (4,105) from holding DENSO or give up 75.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.55% |
| Values | Daily Returns |
DENSO vs. Autoliv
Performance |
| Timeline |
| DENSO |
| Autoliv |
DENSO and Autoliv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DENSO and Autoliv
The main advantage of trading using opposite DENSO and Autoliv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DENSO 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.| DENSO vs. Bridgestone Corp ADR | DENSO vs. American Axle Manufacturing | DENSO vs. Dana Inc | DENSO vs. Aeva Technologies |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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