Correlation Between American Axle and Precision Drilling
Can any of the company-specific risk be diversified away by investing in both American Axle and Precision Drilling 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 Precision Drilling 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 Precision Drilling, you can compare the effects of market volatilities on American Axle and Precision Drilling 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 Precision Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Precision Drilling.
Diversification Opportunities for American Axle and Precision Drilling
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Precision is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Precision Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision Drilling 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 Precision Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision Drilling has no effect on the direction of American Axle i.e., American Axle and Precision Drilling go up and down completely randomly.
Pair Corralation between American Axle and Precision Drilling
Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 1.43 times more return on investment than Precision Drilling. However, American Axle is 1.43 times more volatile than Precision Drilling. It trades about 0.26 of its potential returns per unit of risk. Precision Drilling is currently generating about 0.05 per unit of risk. If you would invest 580.00 in American Axle Manufacturing on September 4, 2024 and sell it today you would earn a total of 97.00 from holding American Axle Manufacturing or generate 16.72% 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. Precision Drilling
Performance |
| Timeline |
| American Axle Manufa |
| Precision Drilling |
American Axle and Precision Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Precision Drilling
The main advantage of trading using opposite American Axle and Precision Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Precision Drilling 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 Precision Drilling will offset losses from the drop in Precision Drilling's long position.| American Axle vs. Ford Motor | American Axle vs. General Motors | American Axle vs. Goodyear Tire Rubber | American Axle vs. Li Auto |
| Precision Drilling vs. Helmerich and Payne | Precision Drilling vs. Nabors Industries | Precision Drilling vs. Seadrill Limited | Precision Drilling vs. Patterson UTI Energy |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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