Correlation Between Axa SA and Allianz SE
Can any of the company-specific risk be diversified away by investing in both Axa SA and Allianz SE 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 Allianz SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Axa SA ADR and Allianz SE, you can compare the effects of market volatilities on Axa SA and Allianz SE 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 Allianz SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axa SA and Allianz SE.
Diversification Opportunities for Axa SA and Allianz SE
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Axa and Allianz is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Axa SA ADR and Allianz SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianz SE 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 ADR are associated (or correlated) with Allianz SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianz SE has no effect on the direction of Axa SA i.e., Axa SA and Allianz SE go up and down completely randomly.
Pair Corralation between Axa SA and Allianz SE
Assuming the 90 days horizon Axa SA is expected to generate 1.33 times less return on investment than Allianz SE. But when comparing it to its historical volatility, Axa SA ADR is 1.6 times less risky than Allianz SE. It trades about 0.06 of its potential returns per unit of risk. Allianz SE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 19,266 in Allianz SE on August 28, 2024 and sell it today you would earn a total of 11,520 from holding Allianz SE or generate 59.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 32.77% |
| Values | Daily Returns |
Axa SA ADR vs. Allianz SE
Performance |
| Timeline |
| Axa SA ADR |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Allianz SE |
Axa SA and Allianz SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axa SA and Allianz SE
The main advantage of trading using opposite Axa SA and Allianz SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axa SA position performs unexpectedly, Allianz SE 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 Allianz SE will offset losses from the drop in Allianz SE's long position.The idea behind Axa SA ADR and Allianz SE 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.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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