Correlation Between AXA SA and Aviva PLC
Can any of the company-specific risk be diversified away by investing in both AXA SA and Aviva PLC 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 Aviva PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AXA SA and Aviva PLC ADR, you can compare the effects of market volatilities on AXA SA and Aviva PLC 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 Aviva PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXA SA and Aviva PLC.
Diversification Opportunities for AXA SA and Aviva PLC
Very weak diversification
The 3 months correlation between AXA and Aviva is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding AXA SA and Aviva PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviva PLC ADR 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 Aviva PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviva PLC ADR has no effect on the direction of AXA SA i.e., AXA SA and Aviva PLC go up and down completely randomly.
Pair Corralation between AXA SA and Aviva PLC
Assuming the 90 days horizon AXA SA is expected to generate 1.03 times less return on investment than Aviva PLC. In addition to that, AXA SA is 1.81 times more volatile than Aviva PLC ADR. It trades about 0.05 of its total potential returns per unit of risk. Aviva PLC ADR is currently generating about 0.09 per unit of volatility. If you would invest 1,009 in Aviva PLC ADR on September 2, 2024 and sell it today you would earn a total of 31.00 from holding Aviva PLC ADR or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 9.06% |
| Values | Daily Returns |
AXA SA vs. Aviva PLC ADR
Performance |
| Timeline |
| AXA SA |
| Aviva PLC ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
AXA SA and Aviva PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AXA SA and Aviva PLC
The main advantage of trading using opposite AXA SA and Aviva PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXA SA position performs unexpectedly, Aviva PLC 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 Aviva PLC will offset losses from the drop in Aviva PLC's long position.The idea behind AXA SA and Aviva PLC ADR 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.| Aviva PLC vs. AXA SA | Aviva PLC vs. Assicurazioni Generali SpA | Aviva PLC vs. Athene Holding | Aviva PLC vs. ageas SANV |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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