Correlation Between Lear and Standard

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

By analyzing existing cross correlation between Lear Corporation and Standard Motor Products, you can compare the effects of market volatilities on Lear and Standard 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 Lear with a short position of Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lear and Standard.

Diversification Opportunities for Lear and Standard

0.87

Correlation Coefficient

Lear  Standard

Very poor diversification

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

Pair Corralation between Lear and Standard

Considering the 90-day investment horizon Lear is expected to generate 1.18 times less return on investment than Standard. In addition to that, Lear is 1.25 times more volatile than Standard Motor Products. It trades about 0.1 of its total potential returns per unit of risk. Standard Motor Products is currently generating about 0.15 per unit of volatility. If you would invest  2,734  in Standard Motor Products on May 1, 2025 and sell it today you would earn a total of  473.00  from holding Standard Motor Products or generate 17.3% return on investment over 90 days.

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

Lear Corp.  vs.  Standard Motor Products

Lear

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lear Corporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Lear sustained solid returns over the last few months and may actually be approaching a breakup point.

Standard Motor Products

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Motor Products are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating primary indicators, Standard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lear and Standard

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

The idea behind Lear Corporation and Standard Motor Products 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.