Correlation Between Monro Muffler and American Axle

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

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

Diversification Opportunities for Monro Muffler and American Axle

-0.54

Correlation Coefficient

Monro Muffler  American Axle

Excellent diversification

The 3 months correlation between Monro and American is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Monro Muffler Brake 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 Monro Muffler 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 Monro Muffler Brake 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 Monro Muffler i.e., Monro Muffler and American Axle go up and down completely randomly.

Pair Corralation between Monro Muffler and American Axle

Given the investment horizon of 90 days Monro Muffler Brake is expected to under-perform the American Axle. In addition to that, Monro Muffler is 1.45 times more volatile than American Axle Manufacturing. It trades about -0.14 of its total potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.12 per unit of volatility. If you would invest  666.00  in American Axle Manufacturing on March 6, 2024 and sell it today you would earn a total of  94.00  from holding American Axle Manufacturing or generate 14.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Monro Muffler Brake  vs.  American Axle Manufacturing

Monro Muffler Brake

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Monro Muffler Brake 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 very healthy which may send shares a bit higher in July 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

American Axle Manufa

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Axle Manufacturing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, American Axle disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Monro Muffler and American Axle

The main advantage of trading using opposite Monro Muffler and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monro Muffler 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 Monro Muffler Brake 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..