Correlation Between American Axle and Nio
Can any of the company-specific risk be diversified away by investing in both American Axle and Nio 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 Nio 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 Nio Class A, you can compare the effects of market volatilities on American Axle and Nio 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 Nio. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Nio.
Diversification Opportunities for American Axle and Nio
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Nio is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of American Axle i.e., American Axle and Nio go up and down completely randomly.
Pair Corralation between American Axle and Nio
Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 0.81 times more return on investment than Nio. However, American Axle Manufacturing is 1.23 times less risky than Nio. It trades about 0.14 of its potential returns per unit of risk. Nio Class A is currently generating about -0.26 per unit of risk. If you would invest 611.00 in American Axle Manufacturing on August 30, 2024 and sell it today you would earn a total of 59.00 from holding American Axle Manufacturing or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. Nio Class A
Performance |
| Timeline |
| American Axle Manufa |
| Nio Class A |
American Axle and Nio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Nio
The main advantage of trading using opposite American Axle and Nio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Nio 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 Nio will offset losses from the drop in Nio'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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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