Correlation Between Bank of America and Axon Enterprise
Can any of the company-specific risk be diversified away by investing in both Bank of America and Axon Enterprise 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 Bank of America and Axon Enterprise into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Axon Enterprise, you can compare the effects of market volatilities on Bank of America and Axon Enterprise 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 Bank of America with a short position of Axon Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Axon Enterprise.
Diversification Opportunities for Bank of America and Axon Enterprise
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Axon is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Axon Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axon Enterprise and Bank of America 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 Bank of America are associated (or correlated) with Axon Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axon Enterprise has no effect on the direction of Bank of America i.e., Bank of America and Axon Enterprise go up and down completely randomly.
Pair Corralation between Bank of America and Axon Enterprise
Considering the 90-day investment horizon Bank of America is expected to generate 4.36 times less return on investment than Axon Enterprise. But when comparing it to its historical volatility, Bank of America is 2.17 times less risky than Axon Enterprise. It trades about 0.1 of its potential returns per unit of risk. Axon Enterprise is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 27,672 in Axon Enterprise on September 1, 2024 and sell it today you would earn a total of 37,080 from holding Axon Enterprise or generate 134.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 96.18% |
| Values | Daily Returns |
Bank of America vs. Axon Enterprise
Performance |
| Timeline |
| Bank of America |
| Axon Enterprise |
Bank of America and Axon Enterprise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Axon Enterprise
The main advantage of trading using opposite Bank of America and Axon Enterprise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Axon Enterprise 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 Axon Enterprise will offset losses from the drop in Axon Enterprise's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Axon Enterprise vs. Uniper SE | Axon Enterprise vs. Mulberry Group PLC | Axon Enterprise vs. London Security Plc | Axon Enterprise vs. Triad Group PLC |
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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