Correlation Between Axos Financial and Bancorp

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

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

Diversification Opportunities for Axos Financial and Bancorp

0.68

Correlation Coefficient

Axos Financial  Bancorp

Poor diversification

The 3 months correlation between Axos and Bancorp is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and The Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancorp 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 Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancorp has no effect on the direction of Axos Financial i.e., Axos Financial and Bancorp go up and down completely randomly.

Pair Corralation between Axos Financial and Bancorp

Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Axos Financial is 1.32 times less risky than Bancorp. The stock trades about -0.15 of its potential returns per unit of risk. The The Bancorp is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  5,835  in The Bancorp on September 11, 2024 and sell it today you would lose (254.00) from holding The Bancorp or give up 4.35% of portfolio value over 90 days.

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

Axos Financial  vs.  The Bancorp

Axos Financial

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axos Financial are ranked lower than 11 (%) 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.

Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axos Financial and Bancorp

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

The idea behind Axos Financial and The Bancorp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.