Correlation Between Continental and American Axle
Can any of the company-specific risk be diversified away by investing in both Continental 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 Continental and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Continental AG PK and American Axle Manufacturing, you can compare the effects of market volatilities on Continental 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 Continental with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Continental and American Axle.
Diversification Opportunities for Continental and American Axle
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Continental and American is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Continental AG PK 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 Continental 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 Continental AG PK 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 Continental i.e., Continental and American Axle go up and down completely randomly.
Pair Corralation between Continental and American Axle
Assuming the 90 days horizon Continental AG PK is expected to under-perform the American Axle. In addition to that, Continental is 1.01 times more volatile than American Axle Manufacturing. It trades about -0.07 of its total potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.22 per unit of volatility. If you would invest 707.00 in American Axle Manufacturing on February 12, 2024 and sell it today you would earn a total of 55.00 from holding American Axle Manufacturing or generate 7.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Continental AG PK vs. American Axle Manufacturing
Performance |
Timeline |
Continental AG PK |
American Axle Manufa |
Continental and American Axle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Continental and American Axle
The main advantage of trading using opposite Continental and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Continental 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.Continental vs. Alsea SAB de | Continental vs. Marstons PLC | Continental vs. Dominos Pizza Group | Continental vs. Bagger Daves Burger |
American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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