Correlation Between American Axle and EvoAir Holdings

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

Diversification Opportunities for American Axle and EvoAir Holdings

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Correlation Coefficient

American Axle  EvoAir Holdings

Pay attention - limited upside

The 3 months correlation between American and EvoAir is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and EvoAir Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EvoAir Holdings 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 EvoAir Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EvoAir Holdings has no effect on the direction of American Axle i.e., American Axle and EvoAir Holdings go up and down completely randomly.

Pair Corralation between American Axle and EvoAir Holdings

Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the EvoAir Holdings. In addition to that, American Axle is 13.87 times more volatile than EvoAir Holdings. It trades about -0.01 of its total potential returns per unit of risk. EvoAir Holdings is currently generating about 0.05 per unit of volatility. If you would invest  2,204  in EvoAir Holdings on September 22, 2024 and sell it today you would earn a total of  96.00  from holding EvoAir Holdings or generate 4.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

American Axle Manufacturing  vs.  EvoAir Holdings

American Axle Manufa

Risk-Adjusted Performance

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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.

EvoAir Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EvoAir Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, EvoAir Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with American Axle and EvoAir Holdings

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

The idea behind American Axle Manufacturing and EvoAir Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.