Correlation Between Monro Muffler and American Axle
Can any of the company-specific risk be diversified away by investing in both Monro Muffler 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 Monro Muffler and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monro Muffler Brake and American Axle Manufacturing, you can compare the effects of market volatilities on Monro Muffler 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 Monro Muffler with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monro Muffler and American Axle.
Diversification Opportunities for Monro Muffler and American Axle
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Monro and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Monro Muffler Brake 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 Monro Muffler 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 Monro Muffler Brake 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 Monro Muffler i.e., Monro Muffler and American Axle go up and down completely randomly.
Pair Corralation between Monro Muffler and American Axle
Given the investment horizon of 90 days Monro Muffler Brake is expected to under-perform the American Axle. But the stock apears to be less risky and, when comparing its historical volatility, Monro Muffler Brake is 1.47 times less risky than American Axle. The stock trades about -0.03 of its potential returns per unit of risk. The American Axle Manufacturing is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 604.00 in American Axle Manufacturing on August 24, 2024 and sell it today you would earn a total of 34.00 from holding American Axle Manufacturing or generate 5.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Monro Muffler Brake vs. American Axle Manufacturing
Performance |
| Timeline |
| Monro Muffler Brake |
| American Axle Manufa |
Monro Muffler and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Monro Muffler and American Axle
The main advantage of trading using opposite Monro Muffler and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monro Muffler 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.| Monro Muffler vs. Motorcar Parts of | Monro Muffler vs. Standard Motor Products | Monro Muffler vs. Stoneridge | Monro Muffler vs. Douglas Dynamics |
| American Axle vs. Gentex | American Axle vs. Adient PLC | American Axle vs. Autoliv | American Axle vs. Fox Factory Holding |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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