Correlation Between Aptiv PLC and Primoris Services

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

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

Diversification Opportunities for Aptiv PLC and Primoris Services

0.33

Correlation Coefficient

Aptiv PLC  Primoris Services

Weak diversification

The 3 months correlation between Aptiv and Primoris is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC and Primoris Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primoris Services 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 Primoris Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primoris Services has no effect on the direction of Aptiv PLC i.e., Aptiv PLC and Primoris Services go up and down completely randomly.

Pair Corralation between Aptiv PLC and Primoris Services

Given the investment horizon of 90 days Aptiv PLC is expected to under-perform the Primoris Services. But the stock apears to be less risky and, when comparing its historical volatility, Aptiv PLC is 1.3 times less risky than Primoris Services. The stock trades about -0.01 of its potential returns per unit of risk. The Primoris Services is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,207  in Primoris Services on July 13, 2024 and sell it today you would earn a total of  807.00  from holding Primoris Services or generate 15.5% return on investment over 90 days.

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

Aptiv PLC  vs.  Primoris Services

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 fairly stable basic indicators, Aptiv PLC is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Primoris Services

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Primoris Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile forward indicators, Primoris Services displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aptiv PLC and Primoris Services

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

The idea behind Aptiv PLC and Primoris Services 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.