Correlation Between Pure Cycle and American Axle
Can any of the company-specific risk be diversified away by investing in both Pure Cycle 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 Pure Cycle and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pure Cycle and American Axle Manufacturing, you can compare the effects of market volatilities on Pure Cycle 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 Pure Cycle with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Cycle and American Axle.
Diversification Opportunities for Pure Cycle and American Axle
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pure and American is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle 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 Pure Cycle 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 Pure Cycle 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 Pure Cycle i.e., Pure Cycle and American Axle go up and down completely randomly.
Pair Corralation between Pure Cycle and American Axle
Given the investment horizon of 90 days Pure Cycle is expected to generate 0.73 times more return on investment than American Axle. However, Pure Cycle is 1.37 times less risky than American Axle. It trades about 0.04 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about -0.01 per unit of risk. If you would invest 1,072 in Pure Cycle on September 2, 2024 and sell it today you would earn a total of 382.00 from holding Pure Cycle or generate 35.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pure Cycle vs. American Axle Manufacturing
Performance |
| Timeline |
| Pure Cycle |
| American Axle Manufa |
Pure Cycle and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pure Cycle and American Axle
The main advantage of trading using opposite Pure Cycle and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Cycle 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.| Pure Cycle vs. Cadiz Inc | Pure Cycle vs. Artesian Resources | Pure Cycle vs. Global Water Resources | Pure Cycle vs. Parke Bancorp |
| 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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