Correlation Between Axon Enterprise and Catalyst Media

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

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

Diversification Opportunities for Axon Enterprise and Catalyst Media

0.55

Correlation Coefficient

Axon Enterprise  Catalyst Media

Very weak diversification

The 3 months correlation between Axon and Catalyst is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Catalyst Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Media Group and Axon Enterprise 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 Axon Enterprise are associated (or correlated) with Catalyst Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Media Group has no effect on the direction of Axon Enterprise i.e., Axon Enterprise and Catalyst Media go up and down completely randomly.

Pair Corralation between Axon Enterprise and Catalyst Media

Assuming the 90 days trading horizon Axon Enterprise is expected to generate 2.2 times more return on investment than Catalyst Media. However, Axon Enterprise is 2.2 times more volatile than Catalyst Media Group. It trades about 0.25 of its potential returns per unit of risk. Catalyst Media Group is currently generating about 0.06 per unit of risk. If you would invest  36,341  in Axon Enterprise on September 2, 2024 and sell it today you would earn a total of  28,411  from holding Axon Enterprise or generate 78.18% return on investment over 90 days.

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

Axon Enterprise  vs.  Catalyst Media Group

Axon Enterprise

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Axon Enterprise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Catalyst Media Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Media Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Catalyst Media may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Axon Enterprise and Catalyst Media

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

The idea behind Axon Enterprise and Catalyst Media Group 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.