Correlation Between Guaranty Trust and Axis Bank

Can any of the company-specific risk be diversified away by investing in both Guaranty Trust and Axis Bank 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 Guaranty Trust and Axis Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guaranty Trust Holding and Axis Bank Ltd, you can compare the effects of market volatilities on Guaranty Trust and Axis Bank 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 Guaranty Trust with a short position of Axis Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guaranty Trust and Axis Bank.

Diversification Opportunities for Guaranty Trust and Axis Bank

0.05

Correlation Coefficient

Guaranty Trust  Axis Bank

Significant diversification

The 3 months correlation between Guaranty and Axis is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Guaranty Trust Holding and Axis Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axis Bank and Guaranty Trust 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 Guaranty Trust Holding are associated (or correlated) with Axis Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axis Bank has no effect on the direction of Guaranty Trust i.e., Guaranty Trust and Axis Bank go up and down completely randomly.

Pair Corralation between Guaranty Trust and Axis Bank

Assuming the 90 days trading horizon Guaranty Trust Holding is expected to generate 2.96 times more return on investment than Axis Bank. However, Guaranty Trust is 2.96 times more volatile than Axis Bank Ltd. It trades about 0.12 of its potential returns per unit of risk. Axis Bank Ltd is currently generating about 0.03 per unit of risk. If you would invest  190.00  in Guaranty Trust Holding on December 30, 2024 and sell it today you would earn a total of  60.00  from holding Guaranty Trust Holding or generate 31.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Guaranty Trust Holding  vs.  Axis Bank Ltd

Guaranty Trust Holding

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Guaranty Trust Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Guaranty Trust disclosed solid returns over the last few months and may actually be approaching a breakup point.

Axis Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axis Bank Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Axis Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Guaranty Trust and Axis Bank

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

The idea behind Guaranty Trust Holding and Axis Bank Ltd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.