Correlation Between American Axle and DENSO
Can any of the company-specific risk be diversified away by investing in both American Axle and DENSO 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 DENSO 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 DENSO, you can compare the effects of market volatilities on American Axle and DENSO 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 DENSO. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and DENSO.
Diversification Opportunities for American Axle and DENSO
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and DENSO is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and DENSO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO 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 DENSO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO has no effect on the direction of American Axle i.e., American Axle and DENSO go up and down completely randomly.
Pair Corralation between American Axle and DENSO
Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the DENSO. But the stock apears to be less risky and, when comparing its historical volatility, American Axle Manufacturing is 28.42 times less risky than DENSO. The stock trades about -0.02 of its potential returns per unit of risk. The DENSO is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,441 in DENSO on August 26, 2024 and sell it today you would lose (3,956) from holding DENSO or give up 72.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.56% |
| Values | Daily Returns |
American Axle Manufacturing vs. DENSO
Performance |
| Timeline |
| American Axle Manufa |
| DENSO |
American Axle and DENSO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and DENSO
The main advantage of trading using opposite American Axle and DENSO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, DENSO 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 DENSO will offset losses from the drop in DENSO's long position.| American Axle vs. Fox Factory Holding | American Axle vs. LKQ Corporation | American Axle vs. Commercial Vehicle Group |
| DENSO vs. Bridgestone Corp ADR | DENSO vs. American Axle Manufacturing | DENSO vs. Dana Inc | DENSO vs. Aeva Technologies |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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