Correlation Between American Axle and Paysafe

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

Diversification Opportunities for American Axle and Paysafe

-0.39

Correlation Coefficient

American Axle  Paysafe

Very good diversification

The 3 months correlation between American and Paysafe is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Paysafe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paysafe 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 Paysafe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paysafe has no effect on the direction of American Axle i.e., American Axle and Paysafe go up and down completely randomly.

Pair Corralation between American Axle and Paysafe

Considering the 90-day investment horizon American Axle is expected to generate 13.28 times less return on investment than Paysafe. But when comparing it to its historical volatility, American Axle Manufacturing is 1.45 times less risky than Paysafe. It trades about 0.0 of its potential returns per unit of risk. Paysafe is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,240  in Paysafe on September 18, 2024 and sell it today you would earn a total of  609.00  from holding Paysafe or generate 49.11% 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.  Paysafe

American Axle Manufa

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Axle Manufacturing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, American Axle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Paysafe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paysafe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with American Axle and Paysafe

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

The idea behind American Axle Manufacturing and Paysafe 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.