Correlation Between AXA World and FF European
Can any of the company-specific risk be diversified away by investing in both AXA World and FF European 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 World and FF European into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AXA World Funds and FF European, you can compare the effects of market volatilities on AXA World and FF European 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 World with a short position of FF European. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXA World and FF European.
Diversification Opportunities for AXA World and FF European
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AXA and FJ2B is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AXA World Funds and FF European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FF European and AXA World 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 World Funds are associated (or correlated) with FF European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FF European has no effect on the direction of AXA World i.e., AXA World and FF European go up and down completely randomly.
Pair Corralation between AXA World and FF European
Assuming the 90 days trading horizon AXA World is expected to generate 1.24 times less return on investment than FF European. But when comparing it to its historical volatility, AXA World Funds is 1.17 times less risky than FF European. It trades about 0.32 of its potential returns per unit of risk. FF European is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,996 in FF European on November 5, 2024 and sell it today you would earn a total of 112.00 from holding FF European or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AXA World Funds vs. FF European
Performance |
| Timeline |
| AXA World Funds |
| FF European |
AXA World and FF European Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AXA World and FF European
The main advantage of trading using opposite AXA World and FF European positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXA World position performs unexpectedly, FF European 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 FF European will offset losses from the drop in FF European's long position.| AXA World vs. Groupama Entreprises N | AXA World vs. Renaissance Europe C | AXA World vs. Superior Plus Corp | AXA World vs. Origin Agritech |
| FF European vs. R co Valor F | FF European vs. CM AM Monplus NE | FF European vs. IE00B0H4TS55 | FF European vs. DWS Aktien Strategie |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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