Correlation Between Aptiv PLC and American Axle
Can any of the company-specific risk be diversified away by investing in both Aptiv PLC 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 Aptiv PLC and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aptiv PLC and American Axle Manufacturing, you can compare the effects of market volatilities on Aptiv PLC 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 Aptiv PLC with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptiv PLC and American Axle.
Diversification Opportunities for Aptiv PLC and American Axle
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aptiv and American is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Aptiv PLC 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 Aptiv PLC 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 Aptiv PLC 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 Aptiv PLC i.e., Aptiv PLC and American Axle go up and down completely randomly.
Pair Corralation between Aptiv PLC and American Axle
Given the investment horizon of 90 days Aptiv PLC is expected to generate 1.64 times more return on investment than American Axle. However, Aptiv PLC is 1.64 times more volatile than American Axle Manufacturing. It trades about 0.07 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.08 per unit of risk. If you would invest 7,757 in Aptiv PLC on February 3, 2024 and sell it today you would earn a total of 328.00 from holding Aptiv PLC or generate 4.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Aptiv PLC vs. American Axle Manufacturing
Performance |
Timeline |
Aptiv PLC |
American Axle Manufa |
Aptiv PLC and American Axle Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Aptiv PLC and American Axle
The main advantage of trading using opposite Aptiv PLC and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptiv PLC 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.Aptiv PLC vs. Allison Transmission Holdings | Aptiv PLC vs. LKQ Corporation | Aptiv PLC vs. Fox Factory Holding |
American Axle vs. Allison Transmission Holdings | American Axle vs. LKQ Corporation | American Axle vs. Fox Factory Holding |
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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