Correlation Between Grocery Outlet and American Axle
Can any of the company-specific risk be diversified away by investing in both Grocery Outlet 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 Grocery Outlet and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grocery Outlet Holding and American Axle Manufacturing, you can compare the effects of market volatilities on Grocery Outlet 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 Grocery Outlet with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grocery Outlet and American Axle.
Diversification Opportunities for Grocery Outlet and American Axle
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Grocery and American is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding 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 Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and American Axle go up and down completely randomly.
Pair Corralation between Grocery Outlet and American Axle
Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 1.23 times more return on investment than American Axle. However, Grocery Outlet is 1.23 times more volatile than American Axle Manufacturing. It trades about -0.01 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about -0.03 per unit of risk. If you would invest 2,486 in Grocery Outlet Holding on August 29, 2024 and sell it today you would lose (360.00) from holding Grocery Outlet Holding or give up 14.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grocery Outlet Holding vs. American Axle Manufacturing
Performance |
| Timeline |
| Grocery Outlet Holding |
| American Axle Manufa |
Grocery Outlet and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grocery Outlet and American Axle
The main advantage of trading using opposite Grocery Outlet and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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.| Grocery Outlet vs. Ingles Markets Incorporated | Grocery Outlet vs. Sendas Distribuidora SA | Grocery Outlet vs. Village Super Market | Grocery Outlet vs. Sprouts Farmers Market |
| 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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