Correlation Between First Capital and Axos Financial
Can any of the company-specific risk be diversified away by investing in both First Capital 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 First Capital and Axos Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and Axos Financial, you can compare the effects of market volatilities on First Capital 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 First Capital with a short position of Axos Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Axos Financial.
Diversification Opportunities for First Capital and Axos Financial
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Axos is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial and First Capital 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 First Capital 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 First Capital i.e., First Capital and Axos Financial go up and down completely randomly.
Pair Corralation between First Capital and Axos Financial
Given the investment horizon of 90 days First Capital is expected to generate 4.2 times less return on investment than Axos Financial. But when comparing it to its historical volatility, First Capital is 1.38 times less risky than Axos Financial. It trades about 0.01 of its potential returns per unit of risk. Axos Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,663 in Axos Financial on January 26, 2024 and sell it today you would earn a total of 1,619 from holding Axos Financial or generate 44.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.34% |
| Values | Daily Returns |
First Capital vs. Axos Financial
Performance |
| Timeline |
| First Capital |
| Axos Financial |
First Capital and Axos Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and Axos Financial
The main advantage of trading using opposite First Capital and Axos Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital 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.| First Capital vs. HMN Financial | First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp |
| Axos Financial vs. National Bank Holdings | Axos Financial vs. Community West Bancshares | Axos Financial vs. First Capital | Axos Financial vs. Home Bancorp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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