Correlation Between American Axle and Motorcar Parts
Can any of the company-specific risk be diversified away by investing in both American Axle and Motorcar Parts 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 Motorcar Parts 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 Motorcar Parts of, you can compare the effects of market volatilities on American Axle and Motorcar Parts 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 Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Motorcar Parts.
Diversification Opportunities for American Axle and Motorcar Parts
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Motorcar is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts 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 Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of American Axle i.e., American Axle and Motorcar Parts go up and down completely randomly.
Pair Corralation between American Axle and Motorcar Parts
Considering the 90-day investment horizon American Axle is expected to generate 1.86 times less return on investment than Motorcar Parts. But when comparing it to its historical volatility, American Axle Manufacturing is 1.56 times less risky than Motorcar Parts. It trades about 0.06 of its potential returns per unit of risk. Motorcar Parts of is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 611.00 in Motorcar Parts of on August 31, 2024 and sell it today you would earn a total of 83.00 from holding Motorcar Parts of or generate 13.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. Motorcar Parts of
Performance |
| Timeline |
| American Axle Manufa |
| Motorcar Parts |
American Axle and Motorcar Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Motorcar Parts
The main advantage of trading using opposite American Axle and Motorcar Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Motorcar Parts 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 Motorcar Parts will offset losses from the drop in Motorcar Parts' long position.| American Axle vs. Gentex | American Axle vs. Adient PLC | American Axle vs. Autoliv | American Axle vs. Fox Factory Holding |
| Motorcar Parts vs. Monro Muffler Brake | Motorcar Parts vs. Standard Motor Products | Motorcar Parts vs. Stoneridge | Motorcar Parts vs. Douglas Dynamics |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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