Correlation Between Hyliion Holdings and American Axle

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

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

Diversification Opportunities for Hyliion Holdings and American Axle

0.62

Correlation Coefficient

Hyliion Holdings  American Axle

Poor diversification

The 3 months correlation between Hyliion and American is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hyliion Holdings Corp 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 Hyliion Holdings 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 Hyliion Holdings Corp 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 Hyliion Holdings i.e., Hyliion Holdings and American Axle go up and down completely randomly.

Pair Corralation between Hyliion Holdings and American Axle

Given the investment horizon of 90 days Hyliion Holdings Corp is expected to generate 2.2 times more return on investment than American Axle. However, Hyliion Holdings is 2.2 times more volatile than American Axle Manufacturing. It trades about 0.23 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.05 per unit of risk. If you would invest  174.00  in Hyliion Holdings Corp on September 3, 2024 and sell it today you would earn a total of  195.00  from holding Hyliion Holdings Corp or generate 112.07% return on investment over 90 days.

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

Hyliion Holdings Corp  vs.  American Axle Manufacturing

Hyliion Holdings Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hyliion Holdings Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Hyliion Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

American Axle Manufa

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Axle Manufacturing are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, American Axle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hyliion Holdings and American Axle

The main advantage of trading using opposite Hyliion Holdings and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyliion Holdings 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 Hyliion Holdings Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.