Correlation Between American Axle and BKV

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

Diversification Opportunities for American Axle and BKV

0.37

Correlation Coefficient

American Axle  BKV

Weak diversification

The 3 months correlation between American and BKV is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and BKV Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKV Corporation 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 BKV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKV Corporation has no effect on the direction of American Axle i.e., American Axle and BKV go up and down completely randomly.

Pair Corralation between American Axle and BKV

Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the BKV. In addition to that, American Axle is 1.39 times more volatile than BKV Corporation. It trades about -0.03 of its total potential returns per unit of risk. BKV Corporation is currently generating about 0.21 per unit of volatility. If you would invest  1,800  in BKV Corporation on October 4, 2024 and sell it today you would earn a total of  543.00  from holding BKV Corporation or generate 30.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	18.45%
Values	Daily Returns

American Axle Manufacturing  vs.  BKV 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 quite persistent basic indicators, American Axle is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

BKV Corporation

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BKV Corporation are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward-looking signals, BKV showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Axle and BKV

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

The idea behind American Axle Manufacturing and BKV Corporation 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.