Correlation Between Axon Enterprise and Brother Industries

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

By analyzing existing cross correlation between Axon Enterprise and Brother Industries Ltd, you can compare the effects of market volatilities on Axon Enterprise and Brother Industries 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 Brother Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axon Enterprise and Brother Industries.

Diversification Opportunities for Axon Enterprise and Brother Industries

0.01

Correlation Coefficient

Axon Enterprise  Brother Industries

Significant diversification

The 3 months correlation between Axon and Brother is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Brother Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brother Industries 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 Brother Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brother Industries has no effect on the direction of Axon Enterprise i.e., Axon Enterprise and Brother Industries go up and down completely randomly.

Pair Corralation between Axon Enterprise and Brother Industries

Given the investment horizon of 90 days Axon Enterprise is expected to generate 1.52 times more return on investment than Brother Industries. However, Axon Enterprise is 1.52 times more volatile than Brother Industries Ltd. It trades about 0.1 of its potential returns per unit of risk. Brother Industries Ltd is currently generating about 0.01 per unit of risk. If you would invest  35,462  in Axon Enterprise on December 5, 2024 and sell it today you would earn a total of  18,034  from holding Axon Enterprise or generate 50.85% return on investment over 90 days.

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

Axon Enterprise  vs.  Brother Industries Ltd

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Brother Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brother Industries Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical indicators, Brother Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Axon Enterprise and Brother Industries

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

The idea behind Axon Enterprise and Brother Industries Ltd 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.