Correlation Between American Axle and Gentex
Can any of the company-specific risk be diversified away by investing in both American Axle and Gentex 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 Gentex 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 Gentex, you can compare the effects of market volatilities on American Axle and Gentex 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 Gentex. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Gentex.
Diversification Opportunities for American Axle and Gentex
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Gentex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Gentex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gentex 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 Gentex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gentex has no effect on the direction of American Axle i.e., American Axle and Gentex go up and down completely randomly.
Pair Corralation between American Axle and Gentex
Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the Gentex. In addition to that, American Axle is 2.59 times more volatile than Gentex. It trades about -0.15 of its total potential returns per unit of risk. Gentex is currently generating about -0.09 per unit of volatility. If you would invest 2,861 in Gentex on November 1, 2024 and sell it today you would lose (69.00) from holding Gentex or give up 2.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. Gentex
Performance |
| Timeline |
| American Axle Manufa |
| Gentex |
American Axle and Gentex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Gentex
The main advantage of trading using opposite American Axle and Gentex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Gentex 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 Gentex will offset losses from the drop in Gentex'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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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