Correlation Between American Axle and Monro Muffler
Can any of the company-specific risk be diversified away by investing in both American Axle and Monro Muffler 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 American Axle and Monro Muffler into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Axle Manufacturing and Monro Muffler Brake, you can compare the effects of market volatilities on American Axle and Monro Muffler 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 American Axle with a short position of Monro Muffler. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Monro Muffler.
Diversification Opportunities for American Axle and Monro Muffler
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Monro is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Monro Muffler Brake in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monro Muffler Brake and American Axle 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 American Axle Manufacturing are associated (or correlated) with Monro Muffler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monro Muffler Brake has no effect on the direction of American Axle i.e., American Axle and Monro Muffler go up and down completely randomly.
Pair Corralation between American Axle and Monro Muffler
Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 0.71 times more return on investment than Monro Muffler. However, American Axle Manufacturing is 1.4 times less risky than Monro Muffler. It trades about -0.02 of its potential returns per unit of risk. Monro Muffler Brake is currently generating about -0.3 per unit of risk. If you would invest 749.00 in American Axle Manufacturing on February 23, 2024 and sell it today you would lose (8.00) from holding American Axle Manufacturing or give up 1.07% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
American Axle Manufacturing vs. Monro Muffler Brake
Performance |
Timeline |
American Axle Manufa |
Monro Muffler Brake |
American Axle and Monro Muffler Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Axle and Monro Muffler
The main advantage of trading using opposite American Axle and Monro Muffler positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Monro Muffler 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 Monro Muffler will offset losses from the drop in Monro Muffler's long position.American Axle vs. Allison Transmission Holdings | American Axle vs. Aptiv PLC | American Axle vs. LKQ Corporation | American Axle vs. Magna International |
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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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