Correlation Between Standard and American Axle
Can any of the company-specific risk be diversified away by investing in both Standard 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 Standard and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Motor Products and American Axle Manufacturing, you can compare the effects of market volatilities on Standard 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 Standard with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard and American Axle.
Diversification Opportunities for Standard and American Axle
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Standard and American is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products 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 Standard 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 Standard Motor Products 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 Standard i.e., Standard and American Axle go up and down completely randomly.
Pair Corralation between Standard and American Axle
Considering the 90-day investment horizon Standard Motor Products is expected to generate 1.47 times more return on investment than American Axle. However, Standard is 1.47 times more volatile than American Axle Manufacturing. It trades about 0.15 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.13 per unit of risk. If you would invest 2,900 in Standard Motor Products on August 26, 2024 and sell it today you would earn a total of 414.00 from holding Standard Motor Products or generate 14.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standard Motor Products vs. American Axle Manufacturing
Performance |
| Timeline |
| Standard Motor Products |
| American Axle Manufa |
Standard and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard and American Axle
The main advantage of trading using opposite Standard and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard 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.| Standard vs. Dorman Products | Standard vs. Motorcar Parts of | Standard vs. Douglas Dynamics | Standard vs. Stoneridge |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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