Correlation Between Bridgford Foods and American Axle

Can any of the company-specific risk be diversified away by investing in both Bridgford Foods and American Axle 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 Bridgford Foods and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bridgford Foods and American Axle Manufacturing, you can compare the effects of market volatilities on Bridgford Foods and American Axle 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 Bridgford Foods with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bridgford Foods and American Axle.

Diversification Opportunities for Bridgford Foods and American Axle

0.53

Correlation Coefficient

Bridgford Foods  American Axle

Very weak diversification

The 3 months correlation between Bridgford and American is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bridgford Foods and American Axle Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Axle Manufa and Bridgford Foods 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 Bridgford Foods are associated (or correlated) with American Axle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Axle Manufa has no effect on the direction of Bridgford Foods i.e., Bridgford Foods and American Axle go up and down completely randomly.

Pair Corralation between Bridgford Foods and American Axle

Given the investment horizon of 90 days Bridgford Foods is expected to generate 0.94 times more return on investment than American Axle. However, Bridgford Foods is 1.07 times less risky than American Axle. It trades about 0.33 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about -0.06 per unit of risk. If you would invest  885.00  in Bridgford Foods on September 20, 2024 and sell it today you would earn a total of  164.50  from holding Bridgford Foods or generate 18.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bridgford Foods  vs.  American Axle Manufacturing

Bridgford Foods

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bridgford Foods are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bridgford Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

American Axle Manufa

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days American Axle Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, American Axle is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bridgford Foods and American Axle

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

The idea behind Bridgford Foods and American Axle Manufacturing 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..