Correlation Between Axon Enterprise and Arbor Metals

Can any of the company-specific risk be diversified away by investing in both Axon Enterprise and Arbor Metals 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 Axon Enterprise and Arbor Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axon Enterprise and Arbor Metals Corp, you can compare the effects of market volatilities on Axon Enterprise and Arbor Metals 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 Axon Enterprise with a short position of Arbor Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axon Enterprise and Arbor Metals.

Diversification Opportunities for Axon Enterprise and Arbor Metals

0.32

Correlation Coefficient

Axon Enterprise  Arbor Metals

Weak diversification

The 3 months correlation between Axon and Arbor is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Arbor Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Metals Corp and Axon Enterprise 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 Axon Enterprise are associated (or correlated) with Arbor Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Metals Corp has no effect on the direction of Axon Enterprise i.e., Axon Enterprise and Arbor Metals go up and down completely randomly.

Pair Corralation between Axon Enterprise and Arbor Metals

Given the investment horizon of 90 days Axon Enterprise is expected to under-perform the Arbor Metals. But the stock apears to be less risky and, when comparing its historical volatility, Axon Enterprise is 40.3 times less risky than Arbor Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Arbor Metals Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3.60  in Arbor Metals Corp on December 28, 2024 and sell it today you would earn a total of  0.10  from holding Arbor Metals Corp or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Axon Enterprise  vs.  Arbor Metals Corp

Axon Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axon Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Axon Enterprise is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Arbor Metals Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Metals Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Arbor Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axon Enterprise and Arbor Metals

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

The idea behind Axon Enterprise and Arbor Metals Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.