Correlation Between Dow Jones and American Axle
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and American Axle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and American Axle Manufacturing, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of American Axle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and American Axle.
Diversification Opportunities for Dow Jones and American Axle
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and American is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and American Axle go up and down completely randomly.
Pair Corralation between Dow Jones and American Axle
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.27 times more return on investment than American Axle. However, Dow Jones Industrial is 3.77 times less risky than American Axle. It trades about 0.12 of its potential returns per unit of risk. American Axle Manufacturing is currently generating about 0.02 per unit of risk. If you would invest 4,121,883 in Dow Jones Industrial on May 5, 2025 and sell it today you would earn a total of 236,975 from holding Dow Jones Industrial or generate 5.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Dow Jones Industrial vs. American Axle Manufacturing
Performance |
Timeline |
Dow Jones and American Axle Volatility Contrast
Predicted Return Density |
Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
American Axle Manufacturing
Pair trading matchups for American Axle
Pair Trading with Dow Jones and American Axle
The main advantage of trading using opposite Dow Jones and American Axle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.Dow Jones vs. CF Industries Holdings | Dow Jones vs. Hillman Solutions Corp | Dow Jones vs. Ecovyst | Dow Jones vs. Timken Company |
American Axle vs. Lear Corporation | American Axle vs. Commercial Vehicle Group | American Axle vs. Adient PLC | American Axle vs. Gentex |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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