Correlation Between Axos Financial and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Axos Financial and Merchants Bancorp 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 Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Axos Financial and Merchants Bancorp, you can compare the effects of market volatilities on Axos Financial and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axos Financial and Merchants Bancorp.
Diversification Opportunities for Axos Financial and Merchants Bancorp
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Axos and Merchants is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Axos Financial i.e., Axos Financial and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Axos Financial and Merchants Bancorp
Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the Merchants Bancorp. In addition to that, Axos Financial is 2.64 times more volatile than Merchants Bancorp. It trades about -0.45 of its total potential returns per unit of risk. Merchants Bancorp is currently generating about -0.51 per unit of volatility. If you would invest 2,229 in Merchants Bancorp on September 26, 2024 and sell it today you would lose (159.00) from holding Merchants Bancorp or give up 7.13% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Axos Financial vs. Merchants Bancorp
Performance |
Timeline |
Axos Financial |
Merchants Bancorp |
Axos Financial and Merchants Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Axos Financial and Merchants Bancorp
The main advantage of trading using opposite Axos Financial and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axos Financial position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.Axos Financial vs. National Bank Holdings | Axos Financial vs. Community West Bancshares | Axos Financial vs. First Capital | Axos Financial vs. Home Bancorp |
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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