Correlation Between Fifth Third and Axos Financial
Can any of the company-specific risk be diversified away by investing in both Fifth Third and Axos Financial 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 Fifth Third and Axos Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and Axos Financial, you can compare the effects of market volatilities on Fifth Third and Axos Financial 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 Fifth Third with a short position of Axos Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Axos Financial.
Diversification Opportunities for Fifth Third and Axos Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fifth and Axos is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with Axos Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axos Financial has no effect on the direction of Fifth Third i.e., Fifth Third and Axos Financial go up and down completely randomly.
Pair Corralation between Fifth Third and Axos Financial
Given the investment horizon of 90 days Fifth Third is expected to generate 2.65 times less return on investment than Axos Financial. But when comparing it to its historical volatility, Fifth Third Bancorp is 2.33 times less risky than Axos Financial. It trades about 0.21 of its potential returns per unit of risk. Axos Financial is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 6,703 in Axos Financial on August 29, 2024 and sell it today you would earn a total of 1,736 from holding Axos Financial or generate 25.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fifth Third Bancorp vs. Axos Financial
Performance |
| Timeline |
| Fifth Third Bancorp |
| Axos Financial |
Fifth Third and Axos Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fifth Third and Axos Financial
The main advantage of trading using opposite Fifth Third and Axos Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third position performs unexpectedly, Axos Financial 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 Axos Financial will offset losses from the drop in Axos Financial's long position.| Fifth Third vs. KeyCorp | Fifth Third vs. Regions Financial | Fifth Third vs. Zions Bancorporation | Fifth Third vs. Huntington Bancshares Incorporated |
| Axos Financial vs. Fifth Third Bancorp | Axos Financial vs. Huntington Bancshares Incorporated | Axos Financial vs. MT Bank |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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