Correlation Between Axis Bank and Electrica
Can any of the company-specific risk be diversified away by investing in both Axis Bank and Electrica 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 Electrica 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 Electrica SA, you can compare the effects of market volatilities on Axis Bank and Electrica 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 Electrica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axis Bank and Electrica.
Diversification Opportunities for Axis Bank and Electrica
Poor diversification
The 3 months correlation between Axis and Electrica is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Axis Bank Ltd and Electrica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrica SA 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 Electrica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrica SA has no effect on the direction of Axis Bank i.e., Axis Bank and Electrica go up and down completely randomly.
Pair Corralation between Axis Bank and Electrica
Assuming the 90 days trading horizon Axis Bank Ltd is expected to generate 1.64 times more return on investment than Electrica. However, Axis Bank is 1.64 times more volatile than Electrica SA. It trades about 0.03 of its potential returns per unit of risk. Electrica SA is currently generating about -0.22 per unit of risk. If you would invest 6,760 in Axis Bank Ltd on September 5, 2024 and sell it today you would earn a total of 80.00 from holding Axis Bank Ltd or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Axis Bank Ltd vs. Electrica SA
Performance |
| Timeline |
| Axis Bank |
| Electrica SA |
Axis Bank and Electrica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axis Bank and Electrica
The main advantage of trading using opposite Axis Bank and Electrica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axis Bank position performs unexpectedly, Electrica 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 Electrica will offset losses from the drop in Electrica's long position.| Axis Bank vs. SupplyMe Capital PLC | Axis Bank vs. SM Energy Co | Axis Bank vs. FuelCell Energy | Axis Bank vs. Grand Vision Media |
| Electrica vs. Cairo Communication SpA | Electrica vs. Jupiter Fund Management | Electrica vs. Liontrust Asset Management | Electrica vs. Verizon Communications |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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