Correlation Between Axos Financial and Trupanion

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

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

Diversification Opportunities for Axos Financial and Trupanion

0.59

Correlation Coefficient

Axos Financial  Trupanion

Very weak diversification

The 3 months correlation between Axos and Trupanion is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and Trupanion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trupanion 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 Trupanion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trupanion has no effect on the direction of Axos Financial i.e., Axos Financial and Trupanion go up and down completely randomly.

Pair Corralation between Axos Financial and Trupanion

Allowing for the 90-day total investment horizon Axos Financial is expected to generate 1.3 times less return on investment than Trupanion. But when comparing it to its historical volatility, Axos Financial is 1.09 times less risky than Trupanion. It trades about 0.14 of its potential returns per unit of risk. Trupanion is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,876  in Trupanion on September 3, 2024 and sell it today you would earn a total of  2,455  from holding Trupanion or generate 85.36% return on investment over 90 days.

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

Axos Financial  vs.  Trupanion

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.

Trupanion

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trupanion are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Trupanion reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axos Financial and Trupanion

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

The idea behind Axos Financial and Trupanion 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.