Correlation Between Aptiv PLC and Hafnia

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

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

Diversification Opportunities for Aptiv PLC and Hafnia

0.87

Correlation Coefficient

Aptiv PLC  Hafnia

Very poor diversification

The 3 months correlation between Aptiv and Hafnia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Hafnia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hafnia Limited 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 Hafnia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hafnia Limited has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Hafnia go up and down completely randomly.

Pair Corralation between Aptiv PLC and Hafnia

Given the investment horizon of 90 days Aptiv PLC is expected to generate 1.27 times more return on investment than Hafnia. However, Aptiv PLC is 1.27 times more volatile than Hafnia Limited. It trades about -0.09 of its potential returns per unit of risk. Hafnia Limited is currently generating about -0.16 per unit of risk. If you would invest  7,056  in Aptiv PLC on September 25, 2024 and sell it today you would lose (1,170) from holding Aptiv PLC or give up 16.58% of portfolio value over 90 days.

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

Aptiv PLC  vs.  Hafnia Limited

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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Aptiv PLC and Hafnia

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

The idea behind Aptiv PLC and Hafnia Limited 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.