Correlation Between Adient PLC and American Axle
Can any of the company-specific risk be diversified away by investing in both Adient PLC and American Axle 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 Adient PLC and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adient PLC and American Axle Manufacturing, you can compare the effects of market volatilities on Adient PLC and American Axle 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 Adient PLC with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adient PLC and American Axle.
Diversification Opportunities for Adient PLC and American Axle
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Adient and American is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Adient PLC and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa and Adient 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 Adient PLC are associated (or correlated) with American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of Adient PLC i.e., Adient PLC and American Axle go up and down completely randomly.
Pair Corralation between Adient PLC and American Axle
Given the investment horizon of 90 days Adient PLC is expected to under-perform the American Axle. But the stock apears to be less risky and, when comparing its historical volatility, Adient PLC is 1.2 times less risky than American Axle. The stock trades about -0.05 of its potential returns per unit of risk. The American Axle Manufacturing is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 975.00 in American Axle Manufacturing on August 24, 2024 and sell it today you would lose (337.00) from holding American Axle Manufacturing or give up 34.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adient PLC vs. American Axle Manufacturing
Performance |
| Timeline |
| Adient PLC |
| American Axle Manufa |
Adient PLC and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adient PLC and American Axle
The main advantage of trading using opposite Adient PLC and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adient PLC position performs unexpectedly, American Axle 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 American Axle will offset losses from the drop in American Axle's long position.| Adient PLC vs. Gentex | Adient PLC vs. Autoliv | Adient PLC vs. Fox Factory Holding | Adient PLC vs. Dana Inc |
| American Axle vs. Gentex | American Axle vs. Adient PLC | American Axle vs. Autoliv | American Axle vs. Fox Factory Holding |
Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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