Correlation Between BRP and American Axle
Can any of the company-specific risk be diversified away by investing in both BRP and American Axle 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 BRP and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and American Axle Manufacturing, you can compare the effects of market volatilities on BRP and American Axle 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 BRP with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and American Axle.
Diversification Opportunities for BRP and American Axle
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BRP and American is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa and BRP 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 BRP Inc are associated (or correlated) with American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of BRP i.e., BRP and American Axle go up and down completely randomly.
Pair Corralation between BRP and American Axle
Given the investment horizon of 90 days BRP Inc is expected to under-perform the American Axle. But the stock apears to be less risky and, when comparing its historical volatility, BRP Inc is 1.6 times less risky than American Axle. The stock trades about -0.4 of its potential returns per unit of risk. The American Axle Manufacturing is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 585.00 in American Axle Manufacturing on November 27, 2024 and sell it today you would lose (42.00) from holding American Axle Manufacturing or give up 7.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. American Axle Manufacturing
Performance |
| Timeline |
| BRP Inc |
| American Axle Manufa |
BRP and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and American Axle
The main advantage of trading using opposite BRP and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, American Axle 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 American Axle will offset losses from the drop in American Axle's long position.The idea behind BRP Inc and American Axle Manufacturing pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |