Correlation Between Westport Fuel and Aptiv PLC

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

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

Diversification Opportunities for Westport Fuel and Aptiv PLC

0.16

Correlation Coefficient

Westport Fuel  Aptiv PLC

Average diversification

The 3 months correlation between Westport and Aptiv is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Westport Fuel Systems and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC and Westport Fuel 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 Westport Fuel Systems 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 Westport Fuel i.e., Westport Fuel and Aptiv PLC go up and down completely randomly.

Pair Corralation between Westport Fuel and Aptiv PLC

Given the investment horizon of 90 days Westport Fuel is expected to generate 1.88 times less return on investment than Aptiv PLC. In addition to that, Westport Fuel is 1.53 times more volatile than Aptiv PLC. It trades about 0.07 of its total potential returns per unit of risk. Aptiv PLC is currently generating about 0.2 per unit of volatility. If you would invest  7,301  in Aptiv PLC on February 15, 2024 and sell it today you would earn a total of  983.00  from holding Aptiv PLC or generate 13.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Westport Fuel Systems  vs.  Aptiv PLC

Westport Fuel Systems

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westport Fuel Systems are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Westport Fuel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aptiv PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aptiv PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Aptiv PLC is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Westport Fuel and Aptiv PLC

The main advantage of trading using opposite Westport Fuel and Aptiv PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westport Fuel 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 Westport Fuel Systems 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.