Correlation Between Axon Enterprise and Cobalt Blue

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

By analyzing existing cross correlation between Axon Enterprise and Cobalt Blue Holdings, you can compare the effects of market volatilities on Axon Enterprise and Cobalt Blue 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 Axon Enterprise with a short position of Cobalt Blue. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axon Enterprise and Cobalt Blue.

Diversification Opportunities for Axon Enterprise and Cobalt Blue

-0.34

Correlation Coefficient

Axon Enterprise  Cobalt Blue

Very good diversification

The 3 months correlation between Axon and Cobalt is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and Cobalt Blue Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cobalt Blue Holdings and Axon Enterprise 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 Axon Enterprise are associated (or correlated) with Cobalt Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cobalt Blue Holdings has no effect on the direction of Axon Enterprise i.e., Axon Enterprise and Cobalt Blue go up and down completely randomly.

Pair Corralation between Axon Enterprise and Cobalt Blue

Given the investment horizon of 90 days Axon Enterprise is expected to generate 0.25 times more return on investment than Cobalt Blue. However, Axon Enterprise is 4.03 times less risky than Cobalt Blue. It trades about 0.12 of its potential returns per unit of risk. Cobalt Blue Holdings is currently generating about 0.01 per unit of risk. If you would invest  16,861  in Axon Enterprise on August 30, 2024 and sell it today you would earn a total of  46,635  from holding Axon Enterprise or generate 276.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Axon Enterprise  vs.  Cobalt Blue Holdings

Axon Enterprise

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axon Enterprise are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Axon Enterprise displayed solid returns over the last few months and may actually be approaching a breakup point.

Cobalt Blue Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cobalt Blue Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Cobalt Blue is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Axon Enterprise and Cobalt Blue

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

The idea behind Axon Enterprise and Cobalt Blue Holdings 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.