Correlation Between Aptiv PLC and DENSO
Can any of the company-specific risk be diversified away by investing in both Aptiv PLC and DENSO 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 Aptiv PLC and DENSO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aptiv PLC and DENSO, you can compare the effects of market volatilities on Aptiv PLC and DENSO 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 Aptiv PLC with a short position of DENSO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and DENSO.
Diversification Opportunities for Aptiv PLC and DENSO
Excellent diversification
The 3 months correlation between Aptiv and DENSO is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and DENSO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO and Aptiv PLC 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 Aptiv PLC are associated (or correlated) with DENSO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and DENSO go up and down completely randomly.
Pair Corralation between Aptiv PLC and DENSO
Given the investment horizon of 90 days Aptiv PLC is expected to under-perform the DENSO. But the stock apears to be less risky and, when comparing its historical volatility, Aptiv PLC is 1.2 times less risky than DENSO. The stock trades about -0.16 of its potential returns per unit of risk. The DENSO is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,908 in DENSO on January 18, 2024 and sell it today you would earn a total of 0.00 from holding DENSO or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Aptiv PLC vs. DENSO
Performance |
Timeline |
Aptiv PLC |
DENSO |
Aptiv PLC and DENSO Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aptiv PLC and DENSO
The main advantage of trading using opposite Aptiv PLC and DENSO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptiv PLC position performs unexpectedly, DENSO 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 DENSO will offset losses from the drop in DENSO's long position.Aptiv PLC vs. Mullen Automotive | Aptiv PLC vs. Canoo Inc | Aptiv PLC vs. Faraday Future Intelligent | Aptiv PLC vs. GreenPower Motor |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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