Correlation Between Axon Enterprise and Solvay SA

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

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

Diversification Opportunities for Axon Enterprise and Solvay SA

-0.47

Correlation Coefficient

Axon Enterprise  Solvay SA

Very good diversification

The 3 months correlation between Axon and Solvay is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Solvay SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA ADR 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 Solvay SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay SA ADR has no effect on the direction of Axon Enterprise i.e., Axon Enterprise and Solvay SA go up and down completely randomly.

Pair Corralation between Axon Enterprise and Solvay SA

Given the investment horizon of 90 days Axon Enterprise is expected to under-perform the Solvay SA. In addition to that, Axon Enterprise is 1.64 times more volatile than Solvay SA ADR. It trades about -0.03 of its total potential returns per unit of risk. Solvay SA ADR is currently generating about 0.1 per unit of volatility. If you would invest  310.00  in Solvay SA ADR on December 28, 2024 and sell it today you would earn a total of  45.00  from holding Solvay SA ADR or generate 14.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Axon Enterprise  vs.  Solvay SA ADR

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Solvay SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Solvay SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axon Enterprise and Solvay SA

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

The idea behind Axon Enterprise and Solvay SA ADR 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.