Correlation Between American Axle and Quantumscape Corp

Can any of the company-specific risk be diversified away by investing in both American Axle and Quantumscape Corp 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 Quantumscape Corp 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 Quantumscape Corp, you can compare the effects of market volatilities on American Axle and Quantumscape Corp 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 Quantumscape Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and Quantumscape Corp.

Diversification Opportunities for American Axle and Quantumscape Corp

0.54

Correlation Coefficient

American Axle  Quantumscape Corp

Very weak diversification

The 3 months correlation between American and Quantumscape is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Quantumscape Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantumscape Corp 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 Quantumscape Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantumscape Corp has no effect on the direction of American Axle i.e., American Axle and Quantumscape Corp go up and down completely randomly.

Pair Corralation between American Axle and Quantumscape Corp

Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 0.52 times more return on investment than Quantumscape Corp. However, American Axle Manufacturing is 1.93 times less risky than Quantumscape Corp. It trades about 0.22 of its potential returns per unit of risk. Quantumscape Corp is currently generating about -0.09 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

American Axle Manufacturing  vs.  Quantumscape Corp

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Quantumscape Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quantumscape Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with American Axle and Quantumscape Corp

The main advantage of trading using opposite American Axle and Quantumscape Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Quantumscape Corp 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 Quantumscape Corp will offset losses from the drop in Quantumscape Corp's long position.

The idea behind American Axle Manufacturing and Quantumscape Corp 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..