Correlation Between CVR Energy and Axis Bank

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

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

Diversification Opportunities for CVR Energy and Axis Bank

0.52

Correlation Coefficient

CVR Energy  Axis Bank

Very weak diversification

The 3 months correlation between CVR and Axis is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Axis Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axis Bank and CVR Energy 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 CVR Energy 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 CVR Energy i.e., CVR Energy and Axis Bank go up and down completely randomly.

Pair Corralation between CVR Energy and Axis Bank

Assuming the 90 days trading horizon CVR Energy is expected to generate 3.3 times more return on investment than Axis Bank. However, CVR Energy is 3.3 times more volatile than Axis Bank Ltd. It trades about -0.06 of its potential returns per unit of risk. Axis Bank Ltd is currently generating about -0.19 per unit of risk. If you would invest  2,289  in CVR Energy on September 27, 2024 and sell it today you would lose (473.00) from holding CVR Energy or give up 20.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

CVR Energy  vs.  Axis Bank Ltd

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Axis Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axis Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CVR Energy and Axis Bank

The main advantage of trading using opposite CVR Energy and Axis Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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 CVR Energy 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.

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.