Correlation Between Red Trail and American Axle
Can any of the company-specific risk be diversified away by investing in both Red Trail 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 Red Trail and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Trail Energy and American Axle Manufacturing, you can compare the effects of market volatilities on Red Trail 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 Red Trail with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Trail and American Axle.
Diversification Opportunities for Red Trail and American Axle
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Red and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Red Trail Energy 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 Red Trail 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 Red Trail Energy 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 Red Trail i.e., Red Trail and American Axle go up and down completely randomly.
Pair Corralation between Red Trail and American Axle
Given the investment horizon of 90 days Red Trail is expected to generate 2.33 times less return on investment than American Axle. But when comparing it to its historical volatility, Red Trail Energy is 11.36 times less risky than American Axle. It trades about 0.0 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 720.00 in American Axle Manufacturing on September 14, 2024 and sell it today you would lose (59.00) from holding American Axle Manufacturing or give up 8.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Trail Energy vs. American Axle Manufacturing
Performance |
| Timeline |
| Red Trail Energy |
| American Axle Manufa |
Red Trail and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Trail and American Axle
The main advantage of trading using opposite Red Trail and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Trail 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.| Red Trail vs. American Axle Manufacturing | Red Trail vs. Reservoir Media | Red Trail vs. Marine Products | Red Trail vs. Modine Manufacturing |
| 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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