Correlation Between Axos Financial and West Bancorporation

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

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

Diversification Opportunities for Axos Financial and West Bancorporation

0.95

Correlation Coefficient

Axos Financial  West Bancorporation

Almost no diversification

The 3 months correlation between Axos and West is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and West Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West Bancorporation 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 West Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West Bancorporation has no effect on the direction of Axos Financial i.e., Axos Financial and West Bancorporation go up and down completely randomly.

Pair Corralation between Axos Financial and West Bancorporation

Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the West Bancorporation. In addition to that, Axos Financial is 1.14 times more volatile than West Bancorporation. It trades about -0.34 of its total potential returns per unit of risk. West Bancorporation is currently generating about -0.31 per unit of volatility. If you would invest  2,332  in West Bancorporation on October 10, 2024 and sell it today you would lose (239.00) from holding West Bancorporation or give up 10.25% of portfolio value over 90 days.

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

Axos Financial  vs.  West Bancorp.

Axos Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Axos Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Axos Financial showed solid returns over the last few months and may actually be approaching a breakup point.

West Bancorporation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in West Bancorporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, West Bancorporation sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axos Financial and West Bancorporation

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

The idea behind Axos Financial and West Bancorporation 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 Global Correlations module to find global opportunities by holding instruments from different markets.