Correlation Between Magna International and American Axle
Can any of the company-specific risk be diversified away by investing in both Magna International 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 Magna International and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and American Axle Manufacturing, you can compare the effects of market volatilities on Magna International 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 Magna International with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and American Axle.
Diversification Opportunities for Magna International and American Axle
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Magna and American is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Magna International 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 Magna International 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 Magna International 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 Magna International i.e., Magna International and American Axle go up and down completely randomly.
Pair Corralation between Magna International and American Axle
Considering the 90-day investment horizon Magna International is expected to generate 0.51 times more return on investment than American Axle. However, Magna International is 1.94 times less risky than American Axle. It trades about -0.1 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about -0.12 per unit of risk. If you would invest 4,125 in Magna International on November 3, 2024 and sell it today you would lose (158.00) from holding Magna International or give up 3.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. American Axle Manufacturing
Performance |
| Timeline |
| Magna International |
| American Axle Manufa |
Magna International and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and American Axle
The main advantage of trading using opposite Magna International and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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