Correlation Between National Bank and Axos Financial

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

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

Diversification Opportunities for National Bank and Axos Financial

0.87

Correlation Coefficient

National Bank  Axos Financial

Very poor diversification

The 3 months correlation between National and Axos is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Axos Financial go up and down completely randomly.

Pair Corralation between National Bank and Axos Financial

Given the investment horizon of 90 days National Bank Holdings is expected to generate 0.81 times more return on investment than Axos Financial. However, National Bank Holdings is 1.23 times less risky than Axos Financial. It trades about -0.08 of its potential returns per unit of risk. Axos Financial is currently generating about -0.08 per unit of risk. If you would invest  4,273  in National Bank Holdings on December 28, 2024 and sell it today you would lose (317.00) from holding National Bank Holdings or give up 7.42% of portfolio value over 90 days.

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

National Bank Holdings  vs.  Axos Financial

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 National Bank and Axos Financial

The main advantage of trading using opposite National Bank and Axos Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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 National Bank Holdings 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.