Correlation Between Aviva PLC and AXA SA

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

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

Diversification Opportunities for Aviva PLC and AXA SA

0.53

Correlation Coefficient

Aviva PLC  AXA SA

Very weak diversification

The 3 months correlation between Aviva and AXA is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Aviva PLC ADR and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA and Aviva PLC 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 Aviva PLC ADR are associated (or correlated) with AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of Aviva PLC i.e., Aviva PLC and AXA SA go up and down completely randomly.

Pair Corralation between Aviva PLC and AXA SA

Assuming the 90 days horizon Aviva PLC is expected to generate 7.65 times less return on investment than AXA SA. But when comparing it to its historical volatility, Aviva PLC ADR is 2.72 times less risky than AXA SA. It trades about 0.01 of its potential returns per unit of risk. AXA SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,520  in AXA SA on September 23, 2024 and sell it today you would earn a total of  972.00  from holding AXA SA or generate 38.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.7%
Values	Daily Returns

Aviva PLC ADR  vs.  AXA SA

Aviva PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aviva PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Aviva PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AXA SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AXA SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aviva PLC and AXA SA

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

The idea behind Aviva PLC ADR and AXA SA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.