Correlation Between Axis Bank and GoldMining

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

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

Diversification Opportunities for Axis Bank and GoldMining

-0.31

Correlation Coefficient

Axis Bank  GoldMining

Very good diversification

The 3 months correlation between Axis and GoldMining is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Axis Bank Ltd and GoldMining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoldMining and Axis Bank 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 Axis Bank Ltd are associated (or correlated) with GoldMining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoldMining has no effect on the direction of Axis Bank i.e., Axis Bank and GoldMining go up and down completely randomly.

Pair Corralation between Axis Bank and GoldMining

Assuming the 90 days trading horizon Axis Bank Ltd is expected to generate 0.48 times more return on investment than GoldMining. However, Axis Bank Ltd is 2.07 times less risky than GoldMining. It trades about -0.13 of its potential returns per unit of risk. GoldMining is currently generating about -0.11 per unit of risk. If you would invest  7,460  in Axis Bank Ltd on September 19, 2024 and sell it today you would lose (840.00) from holding Axis Bank Ltd or give up 11.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.19%
Values	Daily Returns

Axis Bank Ltd  vs.  GoldMining

Axis Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axis Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

GoldMining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GoldMining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Axis Bank and GoldMining

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

The idea behind Axis Bank Ltd and GoldMining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.