Correlation Between Motorcar Parts and Autoliv
Can any of the company-specific risk be diversified away by investing in both Motorcar Parts 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 Motorcar Parts and Autoliv into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Motorcar Parts of and Autoliv, you can compare the effects of market volatilities on Motorcar Parts 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 Motorcar Parts with a short position of Autoliv. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motorcar Parts and Autoliv.
Diversification Opportunities for Motorcar Parts and Autoliv
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Motorcar and Autoliv is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of and Autoliv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autoliv and Motorcar Parts 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 Motorcar Parts of 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 Motorcar Parts i.e., Motorcar Parts and Autoliv go up and down completely randomly.
Pair Corralation between Motorcar Parts and Autoliv
Given the investment horizon of 90 days Motorcar Parts of is expected to under-perform the Autoliv. In addition to that, Motorcar Parts is 2.84 times more volatile than Autoliv. It trades about -0.09 of its total potential returns per unit of risk. Autoliv is currently generating about 0.33 per unit of volatility. If you would invest 9,379 in Autoliv on November 1, 2024 and sell it today you would earn a total of 792.00 from holding Autoliv or generate 8.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Motorcar Parts of vs. Autoliv
Performance |
| Timeline |
| Motorcar Parts |
| Autoliv |
Motorcar Parts and Autoliv Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Motorcar Parts and Autoliv
The main advantage of trading using opposite Motorcar Parts and Autoliv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorcar Parts 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.| Motorcar Parts vs. Monro Muffler Brake | Motorcar Parts vs. Standard Motor Products | Motorcar Parts vs. Stoneridge | Motorcar Parts vs. Douglas Dynamics |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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