Correlation Between American Axle and Dana

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

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

Diversification Opportunities for American Axle and Dana

0.86

Correlation Coefficient

American Axle  Dana

Very poor diversification

The 3 months correlation between American and Dana is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding American Axle Manufacturing and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Inc and American Axle 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 American Axle Manufacturing are associated (or correlated) with Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of American Axle i.e., American Axle and Dana go up and down completely randomly.

Pair Corralation between American Axle and Dana

Considering the 90-day investment horizon American Axle is expected to generate 2.31 times less return on investment than Dana. But when comparing it to its historical volatility, American Axle Manufacturing is 1.13 times less risky than Dana. It trades about 0.05 of its potential returns per unit of risk. Dana Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,281  in Dana Inc on February 6, 2024 and sell it today you would earn a total of  50.00  from holding Dana Inc or generate 3.9% return on investment over 90 days.

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

American Axle Manufacturing  vs.  Dana Inc

American Axle Manufa

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Dana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dana Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dana is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with American Axle and Dana

The main advantage of trading using opposite American Axle and Dana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Axle position performs unexpectedly, Dana 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 Dana will offset losses from the drop in Dana's long position.

The idea behind American Axle Manufacturing and Dana Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.