Correlation Between American Axle and BRP
Can any of the company-specific risk be diversified away by investing in both American Axle and BRP 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 BRP 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 BRP Inc, you can compare the effects of market volatilities on American Axle and BRP 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 BRP. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and BRP.
Diversification Opportunities for American Axle and BRP
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and BRP is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and BRP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRP Inc 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 BRP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRP Inc has no effect on the direction of American Axle i.e., American Axle and BRP go up and down completely randomly.
Pair Corralation between American Axle and BRP
Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 1.6 times more return on investment than BRP. However, American Axle is 1.6 times more volatile than BRP Inc. It trades about -0.06 of its potential returns per unit of risk. BRP Inc is currently generating about -0.4 per unit of risk. If you would invest 585.00 in American Axle Manufacturing on November 27, 2024 and sell it today you would lose (42.00) from holding American Axle Manufacturing or give up 7.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. BRP Inc
Performance |
| Timeline |
| American Axle Manufa |
| BRP Inc |
American Axle and BRP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and BRP
The main advantage of trading using opposite American Axle and BRP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, BRP 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 BRP will offset losses from the drop in BRP's long position.| 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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