Correlation Between Axos Financial and Saratoga Investment

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

By analyzing existing cross correlation between Axos Financial and Saratoga Investment Corp, you can compare the effects of market volatilities on Axos Financial and Saratoga Investment 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 Saratoga Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axos Financial and Saratoga Investment.

Diversification Opportunities for Axos Financial and Saratoga Investment

0.82

Correlation Coefficient

Axos Financial  Saratoga Investment

Very poor diversification

The 3 months correlation between Axos and Saratoga is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and Saratoga Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saratoga Investment Corp 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 Saratoga Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saratoga Investment Corp has no effect on the direction of Axos Financial i.e., Axos Financial and Saratoga Investment go up and down completely randomly.

Pair Corralation between Axos Financial and Saratoga Investment

Allowing for the 90-day total investment horizon Axos Financial is expected to generate 2.79 times more return on investment than Saratoga Investment. However, Axos Financial is 2.79 times more volatile than Saratoga Investment Corp. It trades about 0.11 of its potential returns per unit of risk. Saratoga Investment Corp is currently generating about 0.15 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 Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Axos Financial  vs.  Saratoga Investment Corp

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.

Saratoga Investment Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saratoga Investment Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Saratoga Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Axos Financial and Saratoga Investment

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

The idea behind Axos Financial and Saratoga Investment Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.