Correlation Between American Axle and RALPH

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

Diversification Opportunities for American Axle and RALPH

0.06

Correlation Coefficient

American Axle  RALPH

Significant diversification

The 3 months correlation between American and RALPH is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and RALPH LAUREN P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RALPH LAUREN P 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 RALPH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RALPH LAUREN P has no effect on the direction of American Axle i.e., American Axle and RALPH go up and down completely randomly.

Pair Corralation between American Axle and RALPH

Considering the 90-day investment horizon American Axle Manufacturing is expected to under-perform the RALPH. In addition to that, American Axle is 9.82 times more volatile than RALPH LAUREN P. It trades about -0.14 of its total potential returns per unit of risk. RALPH LAUREN P is currently generating about -0.11 per unit of volatility. If you would invest  9,933  in RALPH LAUREN P on December 1, 2024 and sell it today you would lose (242.00) from holding RALPH LAUREN P or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

American Axle Manufacturing  vs.  RALPH LAUREN P

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.

RALPH LAUREN P

Risk-Adjusted Performance

Very Weak

Over the last 90 days RALPH LAUREN P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RALPH is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Axle and RALPH

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

The idea behind American Axle Manufacturing and RALPH LAUREN P 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.