Correlation Between AXA World and R Co

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

By analyzing existing cross correlation between AXA World Funds and R co Valor F, you can compare the effects of market volatilities on AXA World and R Co 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 AXA World with a short position of R Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXA World and R Co.

Diversification Opportunities for AXA World and R Co

0.85

Correlation Coefficient

AXA World  R Co

Very poor diversification

The 3 months correlation between AXA and 0P00017SX2 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding AXA World Funds and R co Valor F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on R co Valor and AXA World 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 AXA World Funds are associated (or correlated) with R Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of R co Valor has no effect on the direction of AXA World i.e., AXA World and R Co go up and down completely randomly.

Pair Corralation between AXA World and R Co

Assuming the 90 days trading horizon AXA World Funds is expected to generate 0.5 times more return on investment than R Co. However, AXA World Funds is 2.0 times less risky than R Co. It trades about 0.29 of its potential returns per unit of risk. R co Valor F is currently generating about 0.07 per unit of risk. If you would invest  20,463  in AXA World Funds on December 24, 2024 and sell it today you would earn a total of  1,193  from holding AXA World Funds or generate 5.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.33%
Values	Daily Returns

AXA World Funds  vs.  R co Valor F

AXA World Funds

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AXA World Funds are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable basic indicators, AXA World is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

R co Valor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in R co Valor F are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, R Co is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AXA World and R Co

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

The idea behind AXA World Funds and R co Valor F 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.