Correlation Between American Axle and Magna International
Can any of the company-specific risk be diversified away by investing in both American Axle and Magna International 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 Magna International 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 Magna International, you can compare the effects of market volatilities on American Axle and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Magna International.
Diversification Opportunities for American Axle and Magna International
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Magna is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of American Axle i.e., American Axle and Magna International go up and down completely randomly.
Pair Corralation between American Axle and Magna International
Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 1.47 times more return on investment than Magna International. However, American Axle is 1.47 times more volatile than Magna International. It trades about 0.13 of its potential returns per unit of risk. Magna International is currently generating about 0.13 per unit of risk. If you would invest 604.00 in American Axle Manufacturing on August 24, 2024 and sell it today you would earn a total of 54.00 from holding American Axle Manufacturing or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. Magna International
Performance |
| Timeline |
| American Axle Manufa |
| Magna International |
American Axle and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Magna International
The main advantage of trading using opposite American Axle and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| American Axle vs. Gentex | American Axle vs. Fox Factory Holding | American Axle vs. Dana Inc | American Axle vs. Lear Corporation |
| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 CEOs Directory module to screen CEOs from public companies around the world.
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