Correlation Between Global Ship and American Axle
Can any of the company-specific risk be diversified away by investing in both Global Ship 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 Global Ship and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Ship Lease and American Axle Manufacturing, you can compare the effects of market volatilities on Global Ship 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 Global Ship with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and American Axle.
Diversification Opportunities for Global Ship and American Axle
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Global and American is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease 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 Global Ship 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 Global Ship Lease 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 Global Ship i.e., Global Ship and American Axle go up and down completely randomly.
Pair Corralation between Global Ship and American Axle
Assuming the 90 days trading horizon Global Ship is expected to generate 14.14 times less return on investment than American Axle. But when comparing it to its historical volatility, Global Ship Lease is 4.49 times less risky than American Axle. It trades about 0.08 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 576.00 in American Axle Manufacturing on September 2, 2024 and sell it today you would earn a total of 85.00 from holding American Axle Manufacturing or generate 14.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Ship Lease vs. American Axle Manufacturing
Performance |
| Timeline |
| Global Ship Lease |
| American Axle Manufa |
Global Ship and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Ship and American Axle
The main advantage of trading using opposite Global Ship and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Ship 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.| Global Ship vs. Safe Bulkers | Global Ship vs. Diana Shipping | Global Ship vs. Costamare | Global Ship vs. Safe Bulkers |
| American Axle vs. Ford Motor | American Axle vs. General Motors | American Axle vs. Goodyear Tire Rubber | American Axle vs. Li Auto |
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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