Correlation Between American Axle and Ultra Clean
Can any of the company-specific risk be diversified away by investing in both American Axle and Ultra Clean 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 Ultra Clean 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 Ultra Clean Holdings, you can compare the effects of market volatilities on American Axle and Ultra Clean 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 Ultra Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Ultra Clean.
Diversification Opportunities for American Axle and Ultra Clean
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Ultra is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Ultra Clean Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Clean Holdings 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 Ultra Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Clean Holdings has no effect on the direction of American Axle i.e., American Axle and Ultra Clean go up and down completely randomly.
Pair Corralation between American Axle and Ultra Clean
Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 0.77 times more return on investment than Ultra Clean. However, American Axle Manufacturing is 1.3 times less risky than Ultra Clean. It trades about 0.03 of its potential returns per unit of risk. Ultra Clean Holdings is currently generating about 0.02 per unit of risk. If you would invest 646.00 in American Axle Manufacturing on August 29, 2024 and sell it today you would earn a total of 17.00 from holding American Axle Manufacturing or generate 2.63% 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. Ultra Clean Holdings
Performance |
| Timeline |
| American Axle Manufa |
| Ultra Clean Holdings |
American Axle and Ultra Clean Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Axle and Ultra Clean
The main advantage of trading using opposite American Axle and Ultra Clean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Ultra Clean 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 Ultra Clean will offset losses from the drop in Ultra Clean's long position.| American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
| Ultra Clean vs. Power Integrations | Ultra Clean vs. Diodes Incorporated | Ultra Clean vs. MACOM Technology Solutions | Ultra Clean vs. Cirrus Logic |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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