Correlation Between American Axle and Tenaris SA
Can any of the company-specific risk be diversified away by investing in both American Axle and Tenaris SA 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 Tenaris SA 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 Tenaris SA ADR, you can compare the effects of market volatilities on American Axle and Tenaris SA 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 Tenaris SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Tenaris SA.
Diversification Opportunities for American Axle and Tenaris SA
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Tenaris is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Tenaris SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenaris SA ADR 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 Tenaris SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenaris SA ADR has no effect on the direction of American Axle i.e., American Axle and Tenaris SA go up and down completely randomly.
Pair Corralation between American Axle and Tenaris SA
Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the Tenaris SA. In addition to that, American Axle is 2.44 times more volatile than Tenaris SA ADR. It trades about -0.16 of its total potential returns per unit of risk. Tenaris SA ADR is currently generating about -0.04 per unit of volatility. If you would invest 3,921 in Tenaris SA ADR on November 19, 2024 and sell it today you would lose (57.00) from holding Tenaris SA ADR or give up 1.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Axle Manufacturing vs. Tenaris SA ADR
Performance |
| Timeline |
| American Axle Manufa |
| Tenaris SA ADR |
American Axle and Tenaris SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Tenaris SA
The main advantage of trading using opposite American Axle and Tenaris SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Tenaris SA 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 Tenaris SA will offset losses from the drop in Tenaris SA's long position.| American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
| Tenaris SA vs. TechnipFMC PLC | Tenaris SA vs. Now Inc | Tenaris SA vs. ChampionX | Tenaris SA vs. Baker Hughes Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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