Correlation Between American Axle and Antero Midstream
Can any of the company-specific risk be diversified away by investing in both American Axle and Antero Midstream 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 American Axle and Antero Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Axle Manufacturing and Antero Midstream Partners, you can compare the effects of market volatilities on American Axle and Antero Midstream 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 American Axle with a short position of Antero Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Antero Midstream.
Diversification Opportunities for American Axle and Antero Midstream
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Antero is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Antero Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Midstream Partners and American Axle 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 American Axle Manufacturing are associated (or correlated) with Antero Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Midstream Partners has no effect on the direction of American Axle i.e., American Axle and Antero Midstream go up and down completely randomly.
Pair Corralation between American Axle and Antero Midstream
Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the Antero Midstream. In addition to that, American Axle is 2.08 times more volatile than Antero Midstream Partners. It trades about -0.01 of its total potential returns per unit of risk. Antero Midstream Partners is currently generating about 0.1 per unit of volatility. If you would invest 1,192 in Antero Midstream Partners on September 2, 2024 and sell it today you would earn a total of 405.00 from holding Antero Midstream Partners or generate 33.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. Antero Midstream Partners
Performance |
| Timeline |
| American Axle Manufa |
| Antero Midstream Partners |
American Axle and Antero Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Antero Midstream
The main advantage of trading using opposite American Axle and Antero Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Antero Midstream 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 Antero Midstream will offset losses from the drop in Antero Midstream's long position.| American Axle vs. Ford Motor | American Axle vs. General Motors | American Axle vs. Goodyear Tire Rubber | American Axle vs. Li Auto |
| Antero Midstream vs. EnLink Midstream LLC | Antero Midstream vs. Western Midstream Partners | Antero Midstream vs. Plains GP Holdings | Antero Midstream vs. Plains All American |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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