Correlation Between Aptiv PLC and Dana
Can any of the company-specific risk be diversified away by investing in both Aptiv PLC and Dana 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 Dana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aptiv PLC and Dana Inc, you can compare the effects of market volatilities on Aptiv PLC and Dana 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 Dana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and Dana.
Diversification Opportunities for Aptiv PLC and Dana
Poor diversification
The 3 months correlation between Aptiv and Dana is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Inc 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 Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Dana go up and down completely randomly.
Pair Corralation between Aptiv PLC and Dana
Given the investment horizon of 90 days Aptiv PLC is expected to under-perform the Dana. But the stock apears to be less risky and, when comparing its historical volatility, Aptiv PLC is 1.1 times less risky than Dana. The stock trades about -0.14 of its potential returns per unit of risk. The Dana Inc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,356 in Dana Inc on January 26, 2024 and sell it today you would lose (106.00) from holding Dana Inc or give up 7.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aptiv PLC vs. Dana Inc
Performance |
| Timeline |
| Aptiv PLC |
| Dana Inc |
Aptiv PLC and Dana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aptiv PLC and Dana
The main advantage of trading using opposite Aptiv PLC and Dana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptiv PLC position performs unexpectedly, Dana 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 Dana will offset losses from the drop in Dana's long position.The idea behind Aptiv PLC and Dana Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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