Correlation Between AXIS Capital and Communication Services

Can any of the company-specific risk be diversified away by investing in both AXIS Capital and Communication Services 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 Capital and Communication Services into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AXIS Capital Holdings and Communication Services Select, you can compare the effects of market volatilities on AXIS Capital and Communication Services 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 Capital with a short position of Communication Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXIS Capital and Communication Services.

Diversification Opportunities for AXIS Capital and Communication Services

0.73

Correlation Coefficient

AXIS Capital  Communication Services

Poor diversification

The 3 months correlation between AXIS and Communication is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding AXIS Capital Holdings and Communication Services Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Communication Services and AXIS 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 AXIS Capital Holdings are associated (or correlated) with Communication Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Communication Services has no effect on the direction of AXIS Capital i.e., AXIS Capital and Communication Services go up and down completely randomly.

Pair Corralation between AXIS Capital and Communication Services

Considering the 90-day investment horizon AXIS Capital Holdings is expected to generate 2.18 times more return on investment than Communication Services. However, AXIS Capital is 2.18 times more volatile than Communication Services Select. It trades about 0.47 of its potential returns per unit of risk. Communication Services Select is currently generating about 0.31 per unit of risk. If you would invest  6,539  in AXIS Capital Holdings on March 4, 2024 and sell it today you would earn a total of  849.00  from holding AXIS Capital Holdings or generate 12.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

AXIS Capital Holdings  vs.  Communication Services Select

AXIS Capital Holdings

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AXIS Capital Holdings are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, AXIS Capital unveiled solid returns over the last few months and may actually be approaching a breakup point.

Communication Services

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Communication Services Select are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Communication Services is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AXIS Capital and Communication Services

The main advantage of trading using opposite AXIS Capital and Communication Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXIS Capital position performs unexpectedly, Communication Services 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 Communication Services will offset losses from the drop in Communication Services' long position.

The idea behind AXIS Capital Holdings and Communication Services Select pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.