Correlation Between American Axle and Continental Aktiengesellscha
Can any of the company-specific risk be diversified away by investing in both American Axle and Continental Aktiengesellscha 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 Continental Aktiengesellscha 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 Continental Aktiengesellschaft, you can compare the effects of market volatilities on American Axle and Continental Aktiengesellscha 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 Continental Aktiengesellscha. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Continental Aktiengesellscha.
Diversification Opportunities for American Axle and Continental Aktiengesellscha
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Continental is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Continental Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Aktiengesellscha 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 Continental Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Aktiengesellscha has no effect on the direction of American Axle i.e., American Axle and Continental Aktiengesellscha go up and down completely randomly.
Pair Corralation between American Axle and Continental Aktiengesellscha
Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 0.79 times more return on investment than Continental Aktiengesellscha. However, American Axle Manufacturing is 1.27 times less risky than Continental Aktiengesellscha. It trades about 0.13 of its potential returns per unit of risk. Continental Aktiengesellschaft is currently generating about -0.02 per unit of risk. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. Continental Aktiengesellschaft
Performance |
| Timeline |
| American Axle Manufa |
| Continental Aktiengesellscha |
American Axle and Continental Aktiengesellscha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Continental Aktiengesellscha
The main advantage of trading using opposite American Axle and Continental Aktiengesellscha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Continental Aktiengesellscha 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 Continental Aktiengesellscha will offset losses from the drop in Continental Aktiengesellscha's long position.The idea behind American Axle Manufacturing and Continental Aktiengesellschaft 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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