Correlation Between AXA SA and Fountaine Pajo

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

By analyzing existing cross correlation between AXA SA and Fountaine Pajo, you can compare the effects of market volatilities on AXA SA and Fountaine Pajo 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 AXA SA with a short position of Fountaine Pajo. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXA SA and Fountaine Pajo.

Diversification Opportunities for AXA SA and Fountaine Pajo

0.72

Correlation Coefficient

AXA SA  Fountaine Pajo

Poor diversification

The 3 months correlation between AXA and Fountaine is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding AXA SA and Fountaine Pajo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fountaine Pajo and AXA SA 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 AXA SA are associated (or correlated) with Fountaine Pajo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fountaine Pajo has no effect on the direction of AXA SA i.e., AXA SA and Fountaine Pajo go up and down completely randomly.

Pair Corralation between AXA SA and Fountaine Pajo

Assuming the 90 days horizon AXA SA is expected to under-perform the Fountaine Pajo. But the stock apears to be less risky and, when comparing its historical volatility, AXA SA is 1.31 times less risky than Fountaine Pajo. The stock trades about -0.07 of its potential returns per unit of risk. The Fountaine Pajo is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  10,000  in Fountaine Pajo on September 12, 2024 and sell it today you would lose (280.00) from holding Fountaine Pajo or give up 2.8% of portfolio value over 90 days.

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

AXA SA  vs.  Fountaine Pajo

AXA SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AXA SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AXA SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fountaine Pajo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fountaine Pajo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fountaine Pajo is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with AXA SA and Fountaine Pajo

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

The idea behind AXA SA and Fountaine Pajo 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.