Correlation Between Aeye and American Axle

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

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

Diversification Opportunities for Aeye and American Axle

0.63

Correlation Coefficient

Aeye  American Axle

Poor diversification

The 3 months correlation between Aeye and American is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aeye Inc 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 Aeye 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 Aeye Inc 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 Aeye i.e., Aeye and American Axle go up and down completely randomly.

Pair Corralation between Aeye and American Axle

Given the investment horizon of 90 days Aeye Inc is expected to under-perform the American Axle. In addition to that, Aeye is 3.2 times more volatile than American Axle Manufacturing. It trades about -0.09 of its total potential returns per unit of risk. American Axle Manufacturing is currently generating about -0.13 per unit of volatility. If you would invest  578.00  in American Axle Manufacturing on December 28, 2024 and sell it today you would lose (147.00) from holding American Axle Manufacturing or give up 25.43% of portfolio value over 90 days.

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

Aeye Inc  vs.  American Axle Manufacturing

Aeye Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aeye Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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.

Pair Trading with Aeye and American Axle

The main advantage of trading using opposite Aeye and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeye 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 Aeye Inc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.