Correlation Between Hesai Group and American Axle

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

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

Diversification Opportunities for Hesai Group and American Axle

0.69

Correlation Coefficient

Hesai Group  American Axle

Poor diversification

The 3 months correlation between Hesai and American is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hesai Group American 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 Hesai Group 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 Hesai Group American 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 Hesai Group i.e., Hesai Group and American Axle go up and down completely randomly.

Pair Corralation between Hesai Group and American Axle

Given the investment horizon of 90 days Hesai Group American is expected to generate 2.89 times more return on investment than American Axle. However, Hesai Group is 2.89 times more volatile than American Axle Manufacturing. It trades about 0.26 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.08 per unit of risk. If you would invest  389.00  in Hesai Group American on September 14, 2024 and sell it today you would earn a total of  721.00  from holding Hesai Group American or generate 185.35% return on investment over 90 days.

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

Hesai Group American  vs.  American Axle Manufacturing

Hesai Group American

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hesai Group American are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Hesai Group demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hesai Group and American Axle

The main advantage of trading using opposite Hesai Group and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hesai Group 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 Hesai Group American 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.