Correlation Between Aptiv PLC and DENSO CORP

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

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

Diversification Opportunities for Aptiv PLC and DENSO CORP

-0.68

Correlation Coefficient

Aptiv PLC  DENSO CORP

Excellent diversification

The 3 months correlation between Aptiv and DENSO is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and DENSO P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO P ADR 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 DENSO CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO P ADR has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and DENSO CORP go up and down completely randomly.

Pair Corralation between Aptiv PLC and DENSO CORP

Assuming the 90 days horizon Aptiv PLC is expected to under-perform the DENSO CORP. In addition to that, Aptiv PLC is 1.7 times more volatile than DENSO P ADR. It trades about -0.09 of its total potential returns per unit of risk. DENSO P ADR is currently generating about -0.01 per unit of volatility. If you would invest  1,319  in DENSO P ADR on September 1, 2024 and sell it today you would lose (19.00) from holding DENSO P ADR or give up 1.44% of portfolio value over 90 days.

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

Aptiv PLC  vs.  DENSO P ADR

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

DENSO P ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DENSO P ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DENSO CORP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aptiv PLC and DENSO CORP

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

The idea behind Aptiv PLC and DENSO P ADR 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.