Correlation Between American Axle and Plum Acquisition

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

Diversification Opportunities for American Axle and Plum Acquisition

-0.64

Correlation Coefficient

American Axle  Plum Acquisition

Excellent diversification

The 3 months correlation between American and Plum is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Plum Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plum Acquisition Corp 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 Plum Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plum Acquisition Corp has no effect on the direction of American Axle i.e., American Axle and Plum Acquisition go up and down completely randomly.

Pair Corralation between American Axle and Plum Acquisition

Considering the 90-day investment horizon American Axle Manufacturing is expected to generate 0.26 times more return on investment than Plum Acquisition. However, American Axle Manufacturing is 3.85 times less risky than Plum Acquisition. It trades about -0.11 of its potential returns per unit of risk. Plum Acquisition Corp is currently generating about -0.08 per unit of risk. If you would invest  586.00  in American Axle Manufacturing on December 27, 2024 and sell it today you would lose (137.00) from holding American Axle Manufacturing or give up 23.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	20.0%
Values	Daily Returns

American Axle Manufacturing  vs.  Plum Acquisition Corp

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.

Plum Acquisition Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Plum Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward-looking 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 Plum Acquisition

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

The idea behind American Axle Manufacturing and Plum Acquisition Corp 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.