Correlation Between American Axle and ZenaTech

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

Diversification Opportunities for American Axle and ZenaTech

0.31

Correlation Coefficient

American Axle  ZenaTech

Weak diversification

The 3 months correlation between American and ZenaTech is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and ZenaTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZenaTech 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 ZenaTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZenaTech has no effect on the direction of American Axle i.e., American Axle and ZenaTech go up and down completely randomly.

Pair Corralation between American Axle and ZenaTech

Considering the 90-day investment horizon American Axle is expected to generate 16.01 times less return on investment than ZenaTech. But when comparing it to its historical volatility, American Axle Manufacturing is 15.31 times less risky than ZenaTech. It trades about 0.08 of its potential returns per unit of risk. ZenaTech is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  880.00  in ZenaTech on September 16, 2024 and sell it today you would lose (183.00) from holding ZenaTech or give up 20.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.08%
Values	Daily Returns

American Axle Manufacturing  vs.  ZenaTech

American Axle Manufa

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Axle Manufacturing are ranked lower than 6 (%) 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.

ZenaTech

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ZenaTech are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, ZenaTech sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Axle and ZenaTech

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

The idea behind American Axle Manufacturing and ZenaTech 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.