Correlation Between Axos Financial and National Bank

Can any of the company-specific risk be diversified away by investing in both Axos Financial and National 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 National 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 National Bank Holdings, you can compare the effects of market volatilities on Axos Financial and National 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axos Financial and National Bank.

Diversification Opportunities for Axos Financial and National Bank

0.87

Correlation Coefficient

Axos Financial  National Bank

Very poor diversification

The 3 months correlation between Axos and National is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of Axos Financial i.e., Axos Financial and National Bank go up and down completely randomly.

Pair Corralation between Axos Financial and National Bank

Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the National Bank. In addition to that, Axos Financial is 1.23 times more volatile than National Bank Holdings. It trades about -0.08 of its total potential returns per unit of risk. National Bank Holdings is currently generating about -0.08 per unit of volatility. If you would invest  4,273  in National Bank Holdings on December 28, 2024 and sell it today you would lose (317.00) from holding National Bank Holdings or give up 7.42% of portfolio value over 90 days.

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

Axos Financial  vs.  National Bank Holdings

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.

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Axos Financial and National Bank

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

The idea behind Axos Financial and National Bank Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.