Correlation Between Motorcar Parts and American Axle
Can any of the company-specific risk be diversified away by investing in both Motorcar Parts 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 Motorcar Parts and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Motorcar Parts of and American Axle Manufacturing, you can compare the effects of market volatilities on Motorcar Parts 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 Motorcar Parts with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motorcar Parts and American Axle.
Diversification Opportunities for Motorcar Parts and American Axle
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Motorcar and American is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Motorcar Parts of 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 Motorcar Parts 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 Motorcar Parts of 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 Motorcar Parts i.e., Motorcar Parts and American Axle go up and down completely randomly.
Pair Corralation between Motorcar Parts and American Axle
Given the investment horizon of 90 days Motorcar Parts of is expected to under-perform the American Axle. In addition to that, Motorcar Parts is 1.45 times more volatile than American Axle Manufacturing. It trades about -0.1 of its total potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.01 per unit of volatility. If you would invest 589.00 in American Axle Manufacturing on October 20, 2024 and sell it today you would earn a total of 0.00 from holding American Axle Manufacturing or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Motorcar Parts of vs. American Axle Manufacturing
Performance |
| Timeline |
| Motorcar Parts |
| American Axle Manufa |
Motorcar Parts and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Motorcar Parts and American Axle
The main advantage of trading using opposite Motorcar Parts and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorcar Parts 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.| Motorcar Parts vs. Monro Muffler Brake | Motorcar Parts vs. Standard Motor Products | Motorcar Parts vs. Stoneridge | Motorcar Parts vs. Douglas Dynamics |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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