Correlation Between Radcom and American Axle

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

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

Diversification Opportunities for Radcom and American Axle

-0.6

Correlation Coefficient

Radcom  American Axle

Excellent diversification

The 3 months correlation between Radcom and American is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Radcom 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 Radcom 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 Radcom 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 Radcom i.e., Radcom and American Axle go up and down completely randomly.

Pair Corralation between Radcom and American Axle

Given the investment horizon of 90 days Radcom is expected to generate 1.21 times more return on investment than American Axle. However, Radcom is 1.21 times more volatile than American Axle Manufacturing. It trades about 0.03 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about -0.14 per unit of risk. If you would invest  1,189  in Radcom on December 3, 2024 and sell it today you would earn a total of  24.00  from holding Radcom or generate 2.02% return on investment over 90 days.

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

Radcom  vs.  American Axle Manufacturing

Radcom

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radcom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Radcom may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Radcom and American Axle

The main advantage of trading using opposite Radcom and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radcom 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 Radcom 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.