Correlation Between Allego and American Axle
Can any of the company-specific risk be diversified away by investing in both Allego 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 Allego and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allego Inc and American Axle Manufacturing, you can compare the effects of market volatilities on Allego 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 Allego with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allego and American Axle.
Diversification Opportunities for Allego and American Axle
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Allego and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Allego Inc 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 Allego 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 Allego Inc 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 Allego i.e., Allego and American Axle go up and down completely randomly.
Pair Corralation between Allego and American Axle
If you would invest 600.00 in American Axle Manufacturing on August 26, 2024 and sell it today you would earn a total of 52.00 from holding American Axle Manufacturing or generate 8.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 9.09% |
| Values | Daily Returns |
Allego Inc vs. American Axle Manufacturing
Performance |
| Timeline |
| Allego Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| American Axle Manufa |
Allego and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Allego and American Axle
The main advantage of trading using opposite Allego and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allego 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.The idea behind Allego Inc and American Axle Manufacturing 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.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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