Correlation Between Axa Equitable and Waterdrop ADR

Can any of the company-specific risk be diversified away by investing in both Axa Equitable and Waterdrop ADR 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 Equitable and Waterdrop ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axa Equitable Holdings and Waterdrop ADR, you can compare the effects of market volatilities on Axa Equitable and Waterdrop ADR 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 Equitable with a short position of Waterdrop ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axa Equitable and Waterdrop ADR.

Diversification Opportunities for Axa Equitable and Waterdrop ADR

0.43

Correlation Coefficient

Axa Equitable  Waterdrop ADR

Very weak diversification

The 3 months correlation between Axa and Waterdrop is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Axa Equitable Holdings and Waterdrop ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waterdrop ADR and Axa Equitable 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 Equitable Holdings are associated (or correlated) with Waterdrop ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waterdrop ADR has no effect on the direction of Axa Equitable i.e., Axa Equitable and Waterdrop ADR go up and down completely randomly.

Pair Corralation between Axa Equitable and Waterdrop ADR

Considering the 90-day investment horizon Axa Equitable is expected to generate 2.48 times less return on investment than Waterdrop ADR. But when comparing it to its historical volatility, Axa Equitable Holdings is 1.76 times less risky than Waterdrop ADR. It trades about 0.09 of its potential returns per unit of risk. Waterdrop ADR is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  118.00  in Waterdrop ADR on December 28, 2024 and sell it today you would earn a total of  29.00  from holding Waterdrop ADR or generate 24.58% return on investment over 90 days.

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

Axa Equitable Holdings  vs.  Waterdrop ADR

Axa Equitable Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axa Equitable Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Axa Equitable may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Waterdrop ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Waterdrop ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal fundamental indicators, Waterdrop ADR demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axa Equitable and Waterdrop ADR

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

The idea behind Axa Equitable Holdings and Waterdrop 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..