Correlation Between Axos Financial and Independent Bank

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

By analyzing existing cross correlation between Axos Financial and Independent Bank, you can compare the effects of market volatilities on Axos Financial and Independent Bank 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 Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axos Financial and Independent Bank.

Diversification Opportunities for Axos Financial and Independent Bank

0.52

Correlation Coefficient

Axos Financial  Independent Bank

Very weak diversification

The 3 months correlation between Axos and Independent is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank 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 Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of Axos Financial i.e., Axos Financial and Independent Bank go up and down completely randomly.

Pair Corralation between Axos Financial and Independent Bank

Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the Independent Bank. But the stock apears to be less risky and, when comparing its historical volatility, Axos Financial is 1.01 times less risky than Independent Bank. The stock trades about -0.08 of its potential returns per unit of risk. The Independent Bank is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6,411  in Independent Bank on December 29, 2024 and sell it today you would lose (92.00) from holding Independent Bank or give up 1.44% of portfolio value over 90 days.

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

Axos Financial  vs.  Independent Bank

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 weak 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.

Independent Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Independent Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Independent Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Axos Financial and Independent Bank

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

The idea behind Axos Financial and Independent Bank 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.