Correlation Between Algoma Steel and American Axle
Can any of the company-specific risk be diversified away by investing in both Algoma Steel 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 Algoma Steel and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algoma Steel Group and American Axle Manufacturing, you can compare the effects of market volatilities on Algoma Steel 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 Algoma Steel with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algoma Steel and American Axle.
Diversification Opportunities for Algoma Steel and American Axle
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Algoma and American is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Algoma Steel Group 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 Algoma Steel 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 Algoma Steel Group 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 Algoma Steel i.e., Algoma Steel and American Axle go up and down completely randomly.
Pair Corralation between Algoma Steel and American Axle
Given the investment horizon of 90 days Algoma Steel is expected to generate 1.6 times less return on investment than American Axle. But when comparing it to its historical volatility, Algoma Steel Group is 1.15 times less risky than American Axle. It trades about 0.09 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 630.00 in American Axle Manufacturing on August 28, 2024 and sell it today you would earn a total of 52.00 from holding American Axle Manufacturing or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algoma Steel Group vs. American Axle Manufacturing
Performance |
| Timeline |
| Algoma Steel Group |
| American Axle Manufa |
Algoma Steel and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algoma Steel and American Axle
The main advantage of trading using opposite Algoma Steel and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algoma Steel 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.| Algoma Steel vs. Labrador Gold Corp | Algoma Steel vs. Aurion Resources | Algoma Steel vs. Puma Exploration | Algoma Steel vs. Golden Star Resource |
| American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |