Correlation Between Sumitomo Electric and American Axle
Can any of the company-specific risk be diversified away by investing in both Sumitomo Electric 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 Sumitomo Electric and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Electric Industries and American Axle Manufacturing, you can compare the effects of market volatilities on Sumitomo Electric 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 Sumitomo Electric with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Electric and American Axle.
Diversification Opportunities for Sumitomo Electric and American Axle
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and American is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Electric Industries 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 Sumitomo Electric 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 Sumitomo Electric Industries 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 Sumitomo Electric i.e., Sumitomo Electric and American Axle go up and down completely randomly.
Pair Corralation between Sumitomo Electric and American Axle
Assuming the 90 days horizon Sumitomo Electric Industries is expected to generate 0.85 times more return on investment than American Axle. However, Sumitomo Electric Industries is 1.17 times less risky than American Axle. It trades about 0.11 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.05 per unit of risk. If you would invest 1,653 in Sumitomo Electric Industries on September 2, 2024 and sell it today you would earn a total of 239.00 from holding Sumitomo Electric Industries or generate 14.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Electric Industries vs. American Axle Manufacturing
Performance |
| Timeline |
| Sumitomo Electric |
| American Axle Manufa |
Sumitomo Electric and American Axle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Electric and American Axle
The main advantage of trading using opposite Sumitomo Electric and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Electric 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.| Sumitomo Electric vs. Allison Transmission Holdings | Sumitomo Electric vs. Luminar Technologies | Sumitomo Electric vs. Quantumscape Corp | Sumitomo Electric vs. Lear Corporation |
| 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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