Correlation Between Axon Enterprise and ACME Lithium
Can any of the company-specific risk be diversified away by investing in both Axon Enterprise and ACME Lithium 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 ACME Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Axon Enterprise and ACME Lithium, you can compare the effects of market volatilities on Axon Enterprise and ACME Lithium 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 ACME Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axon Enterprise and ACME Lithium.
Diversification Opportunities for Axon Enterprise and ACME Lithium
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Axon and ACME is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Axon Enterprise and ACME Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACME Lithium 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 ACME Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACME Lithium has no effect on the direction of Axon Enterprise i.e., Axon Enterprise and ACME Lithium go up and down completely randomly.
Pair Corralation between Axon Enterprise and ACME Lithium
Given the investment horizon of 90 days Axon Enterprise is expected to generate 0.45 times more return on investment than ACME Lithium. However, Axon Enterprise is 2.25 times less risky than ACME Lithium. It trades about 0.35 of its potential returns per unit of risk. ACME Lithium is currently generating about -0.08 per unit of risk. If you would invest 42,350 in Axon Enterprise on September 1, 2024 and sell it today you would earn a total of 22,346 from holding Axon Enterprise or generate 52.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Axon Enterprise vs. ACME Lithium
Performance |
| Timeline |
| Axon Enterprise |
| ACME Lithium |
Axon Enterprise and ACME Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Axon Enterprise and ACME Lithium
The main advantage of trading using opposite Axon Enterprise and ACME Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axon Enterprise position performs unexpectedly, ACME Lithium 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 ACME Lithium will offset losses from the drop in ACME Lithium's long position.| Axon Enterprise vs. Novocure | Axon Enterprise vs. HubSpot | Axon Enterprise vs. DigitalOcean Holdings | Axon Enterprise vs. Appian Corp |
| ACME Lithium vs. ATT Inc | ACME Lithium vs. Merck Company | ACME Lithium vs. Walt Disney | ACME Lithium vs. Caterpillar |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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