Correlation Between American Axle and Bridgford Foods

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

Diversification Opportunities for American Axle and Bridgford Foods

0.53

Correlation Coefficient

American Axle  Bridgford Foods

Very weak diversification

The 3 months correlation between American and Bridgford is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Bridgford Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridgford Foods 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 Bridgford Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridgford Foods has no effect on the direction of American Axle i.e., American Axle and Bridgford Foods go up and down completely randomly.

Pair Corralation between American Axle and Bridgford Foods

Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the Bridgford Foods. In addition to that, American Axle is 1.07 times more volatile than Bridgford Foods. It trades about -0.06 of its total potential returns per unit of risk. Bridgford Foods is currently generating about 0.33 per unit of volatility. If you would invest  885.00  in Bridgford Foods on September 20, 2024 and sell it today you would earn a total of  164.50  from holding Bridgford Foods or generate 18.59% 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.  Bridgford Foods

American Axle Manufa

Risk-Adjusted Performance

0 of 100

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.

Bridgford Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bridgford Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with American Axle and Bridgford Foods

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

The idea behind American Axle Manufacturing and Bridgford Foods 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.