Correlation Between Axis Bank and Weir Group

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

By analyzing existing cross correlation between Axis Bank Ltd and Weir Group PLC, you can compare the effects of market volatilities on Axis Bank and Weir Group 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 Axis Bank with a short position of Weir Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axis Bank and Weir Group.

Diversification Opportunities for Axis Bank and Weir Group

-0.23

Correlation Coefficient

Axis Bank  Weir Group

Very good diversification

The 3 months correlation between Axis and Weir is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Axis Bank Ltd and Weir Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weir Group PLC and Axis Bank 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 Axis Bank Ltd are associated (or correlated) with Weir Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weir Group PLC has no effect on the direction of Axis Bank i.e., Axis Bank and Weir Group go up and down completely randomly.

Pair Corralation between Axis Bank and Weir Group

Assuming the 90 days trading horizon Axis Bank is expected to generate 5.08 times less return on investment than Weir Group. But when comparing it to its historical volatility, Axis Bank Ltd is 1.14 times less risky than Weir Group. It trades about 0.02 of its potential returns per unit of risk. Weir Group PLC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  218,800  in Weir Group PLC on December 27, 2024 and sell it today you would earn a total of  24,200  from holding Weir Group PLC or generate 11.06% return on investment over 90 days.

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

Axis Bank Ltd  vs.  Weir Group PLC

Axis Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axis Bank Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Axis Bank is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Weir Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weir Group PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Weir Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Axis Bank and Weir Group

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

The idea behind Axis Bank Ltd and Weir Group PLC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.