Correlation Between Federal Home and Axos Financial

Can any of the company-specific risk be diversified away by investing in both Federal Home and Axos Financial 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 Federal Home and Axos Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Federal Home Loan and Axos Financial, you can compare the effects of market volatilities on Federal Home and Axos Financial 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 Federal Home with a short position of Axos Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Home and Axos Financial.

Diversification Opportunities for Federal Home and Axos Financial

-0.16

Correlation Coefficient

Federal Home  Axos Financial

Good diversification

The 3 months correlation between Federal and Axos is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Federal Home Loan and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial and Federal Home 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 Federal Home Loan are associated (or correlated) with Axos Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axos Financial has no effect on the direction of Federal Home i.e., Federal Home and Axos Financial go up and down completely randomly.

Pair Corralation between Federal Home and Axos Financial

Given the investment horizon of 90 days Federal Home Loan is expected to generate 5.26 times more return on investment than Axos Financial. However, Federal Home is 5.26 times more volatile than Axos Financial. It trades about 0.21 of its potential returns per unit of risk. Axos Financial is currently generating about -0.07 per unit of risk. If you would invest  248.00  in Federal Home Loan on December 27, 2024 and sell it today you would earn a total of  378.00  from holding Federal Home Loan or generate 152.42% return on investment over 90 days.

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

Federal Home Loan  vs.  Axos Financial

Federal Home Loan

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Federal Home Loan are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Federal Home exhibited solid returns over the last few months and may actually be approaching a breakup point.

Axos Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axos Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Federal Home and Axos Financial

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

The idea behind Federal Home Loan and Axos Financial 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.