Correlation Between American Axle and Insteel Industries
Can any of the company-specific risk be diversified away by investing in both American Axle and Insteel Industries 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 Insteel Industries 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 Insteel Industries, you can compare the effects of market volatilities on American Axle and Insteel Industries 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 Insteel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Insteel Industries.
Diversification Opportunities for American Axle and Insteel Industries
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Insteel is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Insteel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insteel Industries 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 Insteel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insteel Industries has no effect on the direction of American Axle i.e., American Axle and Insteel Industries go up and down completely randomly.
Pair Corralation between American Axle and Insteel Industries
Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 1.28 times more return on investment than Insteel Industries. However, American Axle is 1.28 times more volatile than Insteel Industries. It trades about 0.24 of its potential returns per unit of risk. Insteel Industries is currently generating about 0.21 per unit of risk. If you would invest 581.00 in American Axle Manufacturing on August 31, 2024 and sell it today you would earn a total of 89.00 from holding American Axle Manufacturing or generate 15.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. Insteel Industries
Performance |
| Timeline |
| American Axle Manufa |
| Insteel Industries |
American Axle and Insteel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Insteel Industries
The main advantage of trading using opposite American Axle and Insteel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Insteel Industries 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 Insteel Industries will offset losses from the drop in Insteel Industries' long position.| American Axle vs. Gentex | American Axle vs. Adient PLC | American Axle vs. Autoliv | American Axle vs. Fox Factory Holding |
| Insteel Industries vs. Carpenter Technology | Insteel Industries vs. ESAB Corp | Insteel Industries vs. Gulf Island Fabrication | Insteel Industries vs. Mayville Engineering Co |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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