Correlation Between IA FINANCIAL and AXA SA

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

By analyzing existing cross correlation between IA FINANCIAL P and AXA SA, you can compare the effects of market volatilities on IA FINANCIAL and AXA SA 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 IA FINANCIAL with a short position of AXA SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IA FINANCIAL and AXA SA.

Diversification Opportunities for IA FINANCIAL and AXA SA

-0.66

Correlation Coefficient

IA FINANCIAL  AXA SA

Excellent diversification

The 3 months correlation between 1OD and AXA is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding IA FINANCIAL P and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA and IA FINANCIAL 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 IA FINANCIAL P are associated (or correlated) with AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of IA FINANCIAL i.e., IA FINANCIAL and AXA SA go up and down completely randomly.

Pair Corralation between IA FINANCIAL and AXA SA

Assuming the 90 days horizon IA FINANCIAL P is expected to generate 1.06 times more return on investment than AXA SA. However, IA FINANCIAL is 1.06 times more volatile than AXA SA. It trades about 0.08 of its potential returns per unit of risk. AXA SA is currently generating about 0.05 per unit of risk. If you would invest  4,974  in IA FINANCIAL P on October 4, 2024 and sell it today you would earn a total of  3,926  from holding IA FINANCIAL P or generate 78.93% return on investment over 90 days.

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

IA FINANCIAL P  vs.  AXA SA

IA FINANCIAL P

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IA FINANCIAL P are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, IA FINANCIAL reported solid returns over the last few months and may actually be approaching a breakup point.

AXA SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AXA SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, AXA SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IA FINANCIAL and AXA SA

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

The idea behind IA FINANCIAL P and AXA SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.