Correlation Between Compagnie Generale and American Axle

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

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

Diversification Opportunities for Compagnie Generale and American Axle

-0.33

Correlation Coefficient

Compagnie Generale  American Axle

Very good diversification

The 3 months correlation between Compagnie and American is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Generale des 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 Compagnie Generale 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 Compagnie Generale des 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 Compagnie Generale i.e., Compagnie Generale and American Axle go up and down completely randomly.

Pair Corralation between Compagnie Generale and American Axle

Assuming the 90 days horizon Compagnie Generale des is expected to under-perform the American Axle. But the pink sheet apears to be less risky and, when comparing its historical volatility, Compagnie Generale des is 1.88 times less risky than American Axle. The pink sheet trades about -0.19 of its potential returns per unit of risk. The American Axle Manufacturing is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  622.00  in American Axle Manufacturing on September 3, 2024 and sell it today you would earn a total of  39.00  from holding American Axle Manufacturing or generate 6.27% return on investment over 90 days.

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

Compagnie Generale des  vs.  American Axle Manufacturing

Compagnie Generale des

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compagnie Generale des has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Compagnie Generale and American Axle

The main advantage of trading using opposite Compagnie Generale and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Generale 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 Compagnie Generale des 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.