Correlation Between Cooper Tire and American Axle

Can any of the company-specific risk be diversified away by investing in both Cooper Tire 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 Cooper Tire and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cooper Tire Rubber and American Axle Manufacturing, you can compare the effects of market volatilities on Cooper Tire 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 Cooper Tire with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cooper Tire and American Axle.

Diversification Opportunities for Cooper Tire and American Axle

0.0

Correlation Coefficient

Cooper Tire  American Axle

Pay attention - limited upside

The 3 months correlation between Cooper and American is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cooper Tire Rubber 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 Cooper Tire 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 Cooper Tire Rubber 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 Cooper Tire i.e., Cooper Tire and American Axle go up and down completely randomly.

Pair Corralation between Cooper Tire and American Axle

If you would invest  717.00  in American Axle Manufacturing on January 24, 2024 and sell it today you would earn a total of  32.00  from holding American Axle Manufacturing or generate 4.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cooper Tire Rubber  vs.  American Axle Manufacturing

Cooper Tire Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cooper Tire Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cooper Tire is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

American Axle Manufa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Axle Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, American Axle is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Cooper Tire and American Axle

The main advantage of trading using opposite Cooper Tire and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cooper Tire 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.

The idea behind Cooper Tire Rubber and American Axle Manufacturing pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.