Correlation Between Axos Financial and Third Coast

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

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

Diversification Opportunities for Axos Financial and Third Coast

0.47

Correlation Coefficient

Axos Financial  Third Coast

Very weak diversification

The 3 months correlation between Axos and Third is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and Third Coast Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Coast Bancshares 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 Third Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Coast Bancshares has no effect on the direction of Axos Financial i.e., Axos Financial and Third Coast go up and down completely randomly.

Pair Corralation between Axos Financial and Third Coast

If you would invest  3,490  in Third Coast Bancshares on December 26, 2024 and sell it today you would lose (42.00) from holding Third Coast Bancshares or give up 1.2% 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.  Third Coast Bancshares

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.

Third Coast Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Third Coast Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Third Coast is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Axos Financial and Third Coast

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

The idea behind Axos Financial and Third Coast Bancshares 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.