Correlation Between Lear and Autoliv
Can any of the company-specific risk be diversified away by investing in both Lear 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 Lear and Autoliv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lear Corporation and Autoliv, you can compare the effects of market volatilities on Lear 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 Lear with a short position of Autoliv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lear and Autoliv.
Diversification Opportunities for Lear and Autoliv
Average diversification
The 3 months correlation between Lear and Autoliv is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Lear Corp. and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Lear 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 Lear Corporation 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 Lear i.e., Lear and Autoliv go up and down completely randomly.
Pair Corralation between Lear and Autoliv
Considering the 90-day investment horizon Lear Corporation is expected to under-perform the Autoliv. But the stock apears to be less risky and, when comparing its historical volatility, Lear Corporation is 1.02 times less risky than Autoliv. The stock trades about -0.06 of its potential returns per unit of risk. The Autoliv is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 10,316 in Autoliv on August 27, 2024 and sell it today you would lose (427.00) from holding Autoliv or give up 4.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lear Corp. vs. Autoliv
Performance |
| Timeline |
| Lear |
| Autoliv |
Lear and Autoliv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lear and Autoliv
The main advantage of trading using opposite Lear and Autoliv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lear 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 Lear Corporation 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Global Correlations Find global opportunities by holding instruments from different markets |