Correlation Between American Axle and Pure Cycle
Can any of the company-specific risk be diversified away by investing in both American Axle and Pure Cycle 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 Pure Cycle 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 Pure Cycle, you can compare the effects of market volatilities on American Axle and Pure Cycle 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 Pure Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Pure Cycle.
Diversification Opportunities for American Axle and Pure Cycle
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Pure is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle 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 Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of American Axle i.e., American Axle and Pure Cycle go up and down completely randomly.
Pair Corralation between American Axle and Pure Cycle
Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the Pure Cycle. In addition to that, American Axle is 1.35 times more volatile than Pure Cycle. It trades about -0.01 of its total potential returns per unit of risk. Pure Cycle is currently generating about 0.04 per unit of volatility. If you would invest 1,045 in Pure Cycle on August 31, 2024 and sell it today you would earn a total of 409.00 from holding Pure Cycle or generate 39.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
American Axle Manufacturing vs. Pure Cycle
Performance |
| Timeline |
| American Axle Manufa |
| Pure Cycle |
American Axle and Pure Cycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Pure Cycle
The main advantage of trading using opposite American Axle and Pure Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Pure Cycle 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 Pure Cycle will offset losses from the drop in Pure Cycle's long position.| American Axle vs. Gentex | American Axle vs. Adient PLC | American Axle vs. Autoliv | American Axle vs. Fox Factory Holding |
| Pure Cycle vs. California Water Service | Pure Cycle vs. Consolidated Water Co | Pure Cycle vs. SJW Group Common | Pure Cycle vs. Middlesex Water |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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