Correlation Between Motorcar Parts and Lear
Can any of the company-specific risk be diversified away by investing in both Motorcar Parts and Lear 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 Lear 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 Lear Corporation, you can compare the effects of market volatilities on Motorcar Parts and Lear 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 Lear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motorcar Parts and Lear.
Diversification Opportunities for Motorcar Parts and Lear
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Motorcar and Lear is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of and Lear Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lear 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 Lear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lear has no effect on the direction of Motorcar Parts i.e., Motorcar Parts and Lear go up and down completely randomly.
Pair Corralation between Motorcar Parts and Lear
Given the investment horizon of 90 days Motorcar Parts of is expected to generate 2.26 times more return on investment than Lear. However, Motorcar Parts is 2.26 times more volatile than Lear Corporation. It trades about 0.03 of its potential returns per unit of risk. Lear Corporation is currently generating about -0.15 per unit of risk. If you would invest 675.00 in Motorcar Parts of on August 23, 2024 and sell it today you would earn a total of 20.00 from holding Motorcar Parts of or generate 2.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Motorcar Parts of vs. Lear Corp.
Performance |
| Timeline |
| Motorcar Parts |
| Lear |
Motorcar Parts and Lear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Motorcar Parts and Lear
The main advantage of trading using opposite Motorcar Parts and Lear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorcar Parts position performs unexpectedly, Lear 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 Lear will offset losses from the drop in Lear'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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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