Correlation Between Miller Industries and American Axle
Can any of the company-specific risk be diversified away by investing in both Miller Industries 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 Miller Industries and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Miller Industries and American Axle Manufacturing, you can compare the effects of market volatilities on Miller Industries 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 Miller Industries with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miller Industries and American Axle.
Diversification Opportunities for Miller Industries and American Axle
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Miller and American is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Miller Industries 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 Miller Industries 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 Miller Industries 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 Miller Industries i.e., Miller Industries and American Axle go up and down completely randomly.
Pair Corralation between Miller Industries and American Axle
Considering the 90-day investment horizon Miller Industries is expected to generate 0.96 times more return on investment than American Axle. However, Miller Industries is 1.05 times less risky than American Axle. It trades about 0.16 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.05 per unit of risk. If you would invest 5,814 in Miller Industries on September 2, 2024 and sell it today you would earn a total of 1,548 from holding Miller Industries or generate 26.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Miller Industries vs. American Axle Manufacturing
Performance |
| Timeline |
| Miller Industries |
| American Axle Manufa |
Miller Industries and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Miller Industries and American Axle
The main advantage of trading using opposite Miller Industries and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Miller Industries 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.| Miller Industries vs. Dorman Products | Miller Industries vs. Standard Motor Products | Miller Industries vs. Motorcar Parts of | Miller Industries vs. Douglas Dynamics |
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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