Correlation Between American Axle and SM Investments
Can any of the company-specific risk be diversified away by investing in both American Axle and SM Investments 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 SM Investments 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 SM Investments, you can compare the effects of market volatilities on American Axle and SM Investments 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 SM Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Axle and SM Investments.
Diversification Opportunities for American Axle and SM Investments
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and SVTMF is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and SM Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SM Investments 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 SM Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SM Investments has no effect on the direction of American Axle i.e., American Axle and SM Investments go up and down completely randomly.
Pair Corralation between American Axle and SM Investments
Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the SM Investments. In addition to that, American Axle is 1.41 times more volatile than SM Investments. It trades about -0.03 of its total potential returns per unit of risk. SM Investments is currently generating about 0.01 per unit of volatility. If you would invest 1,623 in SM Investments on October 5, 2024 and sell it today you would earn a total of 17.00 from holding SM Investments or generate 1.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 61.76% |
Values | Daily Returns |
American Axle Manufacturing vs. SM Investments
Performance |
Timeline |
American Axle Manufa |
SM Investments |
American Axle and SM Investments Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with American Axle and SM Investments
The main advantage of trading using opposite American Axle and SM Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, SM Investments 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 SM Investments will offset losses from the drop in SM Investments' long position.American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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