Correlation Between Axos Financial and CIT Group

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

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

Diversification Opportunities for Axos Financial and CIT Group

-0.39

Correlation Coefficient

Axos Financial  CIT Group

Very good diversification

The 3 months correlation between Axos and CIT is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and CIT Group Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIT Group Preferred and Axos Financial 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 Axos Financial are associated (or correlated) with CIT Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIT Group Preferred has no effect on the direction of Axos Financial i.e., Axos Financial and CIT Group go up and down completely randomly.

Pair Corralation between Axos Financial and CIT Group

Allowing for the 90-day total investment horizon Axos Financial is expected to generate 4.34 times more return on investment than CIT Group. However, Axos Financial is 4.34 times more volatile than CIT Group Preferred. It trades about 0.11 of its potential returns per unit of risk. CIT Group Preferred is currently generating about 0.06 per unit of risk. If you would invest  6,815  in Axos Financial on September 3, 2024 and sell it today you would earn a total of  1,470  from holding Axos Financial or generate 21.57% return on investment over 90 days.

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

Axos Financial  vs.  CIT Group Preferred

Axos Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axos Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Axos Financial showed solid returns over the last few months and may actually be approaching a breakup point.

CIT Group Preferred

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CIT Group Preferred are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, CIT Group is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Axos Financial and CIT Group

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

The idea behind Axos Financial and CIT Group Preferred 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.