Correlation Between AXA SA and DIVERSIFIED ROYALTY

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

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

Diversification Opportunities for AXA SA and DIVERSIFIED ROYALTY

-0.5

Correlation Coefficient

AXA SA  DIVERSIFIED ROYALTY

Very good diversification

The 3 months correlation between AXA and DIVERSIFIED is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding AXA SA and DIVERSIFIED ROYALTY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIVERSIFIED ROYALTY and AXA SA 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 AXA SA are associated (or correlated) with DIVERSIFIED ROYALTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIVERSIFIED ROYALTY has no effect on the direction of AXA SA i.e., AXA SA and DIVERSIFIED ROYALTY go up and down completely randomly.

Pair Corralation between AXA SA and DIVERSIFIED ROYALTY

Assuming the 90 days horizon AXA SA is expected to generate 0.6 times more return on investment than DIVERSIFIED ROYALTY. However, AXA SA is 1.67 times less risky than DIVERSIFIED ROYALTY. It trades about 0.06 of its potential returns per unit of risk. DIVERSIFIED ROYALTY is currently generating about 0.03 per unit of risk. If you would invest  2,354  in AXA SA on September 14, 2024 and sell it today you would earn a total of  1,001  from holding AXA SA or generate 42.52% return on investment over 90 days.

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

AXA SA  vs.  DIVERSIFIED ROYALTY

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

DIVERSIFIED ROYALTY

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DIVERSIFIED ROYALTY are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DIVERSIFIED ROYALTY may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with AXA SA and DIVERSIFIED ROYALTY

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

The idea behind AXA SA and DIVERSIFIED ROYALTY 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 Global Correlations module to find global opportunities by holding instruments from different markets.