Correlation Between Wabash National and Adient PLC

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

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

Diversification Opportunities for Wabash National and Adient PLC

-0.31

Correlation Coefficient

Wabash National  Adient PLC

Very good diversification

The 3 months correlation between Wabash and Adient is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Adient PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adient PLC and Wabash National 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 Wabash National are associated (or correlated) with Adient PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adient PLC has no effect on the direction of Wabash National i.e., Wabash National and Adient PLC go up and down completely randomly.

Pair Corralation between Wabash National and Adient PLC

Considering the 90-day investment horizon Wabash National is expected to generate 0.83 times more return on investment than Adient PLC. However, Wabash National is 1.21 times less risky than Adient PLC. It trades about 0.04 of its potential returns per unit of risk. Adient PLC is currently generating about -0.04 per unit of risk. If you would invest  1,852  in Wabash National on September 9, 2024 and sell it today you would earn a total of  79.00  from holding Wabash National or generate 4.27% return on investment over 90 days.

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

Wabash National  vs.  Adient PLC

Wabash National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wabash National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Adient PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adient PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adient PLC is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Wabash National and Adient PLC

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

The idea behind Wabash National and Adient 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.