Correlation Between American Axle and Nio

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

Diversification Opportunities for American Axle and Nio

-0.34

Correlation Coefficient

American Axle  Nio

Very good diversification

The 3 months correlation between American and Nio is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Nio Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nio Class A 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 Nio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nio Class A has no effect on the direction of American Axle i.e., American Axle and Nio go up and down completely randomly.

Pair Corralation between American Axle and Nio

Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the Nio. But the stock apears to be less risky and, when comparing its historical volatility, American Axle Manufacturing is 1.25 times less risky than Nio. The stock trades about -0.13 of its potential returns per unit of risk. The Nio Class A is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  438.00  in Nio Class A on December 28, 2024 and sell it today you would lose (16.00) from holding Nio Class A or give up 3.65% of portfolio value over 90 days.

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

American Axle Manufacturing  vs.  Nio Class A

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.

Nio Class A

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nio Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Nio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with American Axle and Nio

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

The idea behind American Axle Manufacturing and Nio Class A 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..