Correlation Between SentinelOne and Axon Enterprise

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

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

Diversification Opportunities for SentinelOne and Axon Enterprise

0.76

Correlation Coefficient

SentinelOne  Axon Enterprise

Poor diversification

The 3 months correlation between SentinelOne and Axon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and Axon Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axon Enterprise and SentinelOne 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 SentinelOne are associated (or correlated) with Axon Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axon Enterprise has no effect on the direction of SentinelOne i.e., SentinelOne and Axon Enterprise go up and down completely randomly.

Pair Corralation between SentinelOne and Axon Enterprise

Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the Axon Enterprise. But the stock apears to be less risky and, when comparing its historical volatility, SentinelOne is 1.72 times less risky than Axon Enterprise. The stock trades about -0.09 of its potential returns per unit of risk. The Axon Enterprise is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  60,432  in Axon Enterprise on December 29, 2024 and sell it today you would lose (6,937) from holding Axon Enterprise or give up 11.48% of portfolio value over 90 days.

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

SentinelOne  vs.  Axon Enterprise

SentinelOne

Risk-Adjusted Performance

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Axon Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axon Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with SentinelOne and Axon Enterprise

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

The idea behind SentinelOne and Axon Enterprise 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.