Correlation Between Axos Financial and German American

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

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

Diversification Opportunities for Axos Financial and German American

0.64

Correlation Coefficient

Axos Financial  German American

Poor diversification

The 3 months correlation between Axos and German is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and German American Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on German American Bancorp and Axos 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 Axos Financial are associated (or correlated) with German American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of German American Bancorp has no effect on the direction of Axos Financial i.e., Axos Financial and German American go up and down completely randomly.

Pair Corralation between Axos Financial and German American

Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the German American. In addition to that, Axos Financial is 1.25 times more volatile than German American Bancorp. It trades about -0.07 of its total potential returns per unit of risk. German American Bancorp is currently generating about -0.06 per unit of volatility. If you would invest  4,027  in German American Bancorp on December 27, 2024 and sell it today you would lose (222.00) from holding German American Bancorp or give up 5.51% of portfolio value over 90 days.

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

Axos Financial  vs.  German American Bancorp

Axos Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axos Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

German American Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days German American Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, German American is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Axos Financial and German American

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

The idea behind Axos Financial and German American Bancorp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.