Correlation Between American Axle and Alumina
Can any of the company-specific risk be diversified away by investing in both American Axle and Alumina 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 Alumina 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 Alumina Limited, you can compare the effects of market volatilities on American Axle and Alumina 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 Alumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Alumina.
Diversification Opportunities for American Axle and Alumina
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Alumina is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Alumina Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited 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 Alumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited has no effect on the direction of American Axle i.e., American Axle and Alumina go up and down completely randomly.
Pair Corralation between American Axle and Alumina
Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the Alumina. But the stock apears to be less risky and, when comparing its historical volatility, American Axle Manufacturing is 1.12 times less risky than Alumina. The stock trades about -0.01 of its potential returns per unit of risk. The Alumina Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 115.00 in Alumina Limited on September 1, 2024 and sell it today you would lose (4.00) from holding Alumina Limited or give up 3.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 82.42% |
| Values | Daily Returns |
American Axle Manufacturing vs. Alumina Limited
Performance |
| Timeline |
| American Axle Manufa |
| Alumina Limited |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
American Axle and Alumina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Alumina
The main advantage of trading using opposite American Axle and Alumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Alumina 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 Alumina will offset losses from the drop in Alumina's long position.| American Axle vs. Ford Motor | American Axle vs. General Motors | American Axle vs. Goodyear Tire Rubber | American Axle vs. Li Auto |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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