Correlation Between Aptiv PLC and GM

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

By analyzing existing cross correlation between Aptiv PLC and General Motors, you can compare the effects of market volatilities on Aptiv PLC and GM 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 GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and GM.

Diversification Opportunities for Aptiv PLC and GM

-0.8

Correlation Coefficient

Aptiv PLC  GM

Pay attention - limited upside

The 3 months correlation between Aptiv and GM is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and GM go up and down completely randomly.

Pair Corralation between Aptiv PLC and GM

Given the investment horizon of 90 days Aptiv PLC is expected to under-perform the GM. In addition to that, Aptiv PLC is 1.15 times more volatile than General Motors. It trades about -0.12 of its total potential returns per unit of risk. General Motors is currently generating about 0.08 per unit of volatility. If you would invest  4,966  in General Motors on August 30, 2024 and sell it today you would earn a total of  584.00  from holding General Motors or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aptiv PLC  vs.  General Motors

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. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

General Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aptiv PLC and GM

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

The idea behind Aptiv PLC and General Motors 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.