Correlation Between American Axle and Envirotech Vehicles

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

Diversification Opportunities for American Axle and Envirotech Vehicles

0.84

Correlation Coefficient

American Axle  Envirotech Vehicles

Very poor diversification

The 3 months correlation between American and Envirotech is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Envirotech Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Envirotech Vehicles 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 Envirotech Vehicles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Envirotech Vehicles has no effect on the direction of American Axle i.e., American Axle and Envirotech Vehicles go up and down completely randomly.

Pair Corralation between American Axle and Envirotech Vehicles

Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 0.38 times more return on investment than Envirotech Vehicles. However, American Axle Manufacturing is 2.63 times less risky than Envirotech Vehicles. It trades about -0.14 of its potential returns per unit of risk. Envirotech Vehicles is currently generating about -0.24 per unit of risk. If you would invest  683.00  in American Axle Manufacturing on December 2, 2024 and sell it today you would lose (187.00) from holding American Axle Manufacturing or give up 27.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

American Axle Manufacturing  vs.  Envirotech Vehicles

American Axle Manufa

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Envirotech Vehicles

Risk-Adjusted Performance

Very Weak

Over the last 90 days Envirotech Vehicles has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with American Axle and Envirotech Vehicles

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

The idea behind American Axle Manufacturing and Envirotech Vehicles 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.