Correlation Between American Axle and Ford

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

Diversification Opportunities for American Axle and Ford

-0.11

Correlation Coefficient

American Axle  Ford

Good diversification

The 3 months correlation between American and Ford is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of American Axle i.e., American Axle and Ford go up and down completely randomly.

Pair Corralation between American Axle and Ford

Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the Ford. In addition to that, American Axle is 1.68 times more volatile than Ford Motor. It trades about -0.11 of its total potential returns per unit of risk. Ford Motor is currently generating about 0.06 per unit of volatility. If you would invest  971.00  in Ford Motor on December 27, 2024 and sell it today you would earn a total of  58.00  from holding Ford Motor or generate 5.97% return on investment over 90 days.

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

American Axle Manufacturing  vs.  Ford Motor

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.

Ford Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with American Axle and Ford

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

The idea behind American Axle Manufacturing and Ford Motor 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.