Correlation Between Axon Enterprise and Newtek Business

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

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

Diversification Opportunities for Axon Enterprise and Newtek Business

0.87

Correlation Coefficient

Axon Enterprise  Newtek Business

Very poor diversification

The 3 months correlation between Axon and Newtek is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Newtek Business Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtek Business Services 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 Newtek Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtek Business Services has no effect on the direction of Axon Enterprise i.e., Axon Enterprise and Newtek Business go up and down completely randomly.

Pair Corralation between Axon Enterprise and Newtek Business

Given the investment horizon of 90 days Axon Enterprise is expected to generate 0.51 times more return on investment than Newtek Business. However, Axon Enterprise is 1.98 times less risky than Newtek Business. It trades about 0.1 of its potential returns per unit of risk. Newtek Business Services is currently generating about -0.05 per unit of risk. If you would invest  18,447  in Axon Enterprise on October 7, 2024 and sell it today you would earn a total of  41,659  from holding Axon Enterprise or generate 225.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	78.43%
Values	Daily Returns

Axon Enterprise  vs.  Newtek Business Services

Axon Enterprise

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Axon Enterprise displayed solid returns over the last few months and may actually be approaching a breakup point.

Newtek Business Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtek Business Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Newtek Business is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Axon Enterprise and Newtek Business

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

The idea behind Axon Enterprise and Newtek Business Services 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.