Correlation Between Tupy SA and Aptiv PLC

Can any of the company-specific risk be diversified away by investing in both Tupy SA and Aptiv PLC 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 Tupy SA and Aptiv PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tupy SA and Aptiv PLC, you can compare the effects of market volatilities on Tupy SA and Aptiv PLC 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 Tupy SA with a short position of Aptiv PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tupy SA and Aptiv PLC.

Diversification Opportunities for Tupy SA and Aptiv PLC

0.3

Correlation Coefficient

Tupy SA  Aptiv PLC

Weak diversification

The 3 months correlation between Tupy and Aptiv is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tupy SA and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC and Tupy SA 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 Tupy SA are associated (or correlated) with Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Tupy SA i.e., Tupy SA and Aptiv PLC go up and down completely randomly.

Pair Corralation between Tupy SA and Aptiv PLC

Assuming the 90 days trading horizon Tupy SA is expected to under-perform the Aptiv PLC. But the stock apears to be less risky and, when comparing its historical volatility, Tupy SA is 1.19 times less risky than Aptiv PLC. The stock trades about -0.22 of its potential returns per unit of risk. The Aptiv PLC is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  19,480  in Aptiv PLC on February 2, 2024 and sell it today you would lose (1,156) from holding Aptiv PLC or give up 5.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tupy SA  vs.  Aptiv PLC

Tupy SA

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tupy SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Tupy SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aptiv PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aptiv PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tupy SA and Aptiv PLC

The main advantage of trading using opposite Tupy SA and Aptiv PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tupy SA position performs unexpectedly, Aptiv PLC 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 Aptiv PLC will offset losses from the drop in Aptiv PLC's long position.

The idea behind Tupy SA and Aptiv PLC 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.