Correlation Between Assicurazioni Generali and Axa SA

Can any of the company-specific risk be diversified away by investing in both Assicurazioni Generali and Axa SA 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 Assicurazioni Generali and Axa SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Assicurazioni Generali SpA and Axa SA ADR, you can compare the effects of market volatilities on Assicurazioni Generali and Axa SA 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 Assicurazioni Generali with a short position of Axa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Assicurazioni Generali and Axa SA.

Diversification Opportunities for Assicurazioni Generali and Axa SA

0.63

Correlation Coefficient

Assicurazioni Generali  Axa SA

Poor diversification

The 3 months correlation between Assicurazioni and Axa is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Assicurazioni Generali SpA and Axa SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axa SA ADR and Assicurazioni Generali 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 Assicurazioni Generali SpA are associated (or correlated) with Axa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axa SA ADR has no effect on the direction of Assicurazioni Generali i.e., Assicurazioni Generali and Axa SA go up and down completely randomly.

Pair Corralation between Assicurazioni Generali and Axa SA

Assuming the 90 days horizon Assicurazioni Generali is expected to generate 1.02 times less return on investment than Axa SA. In addition to that, Assicurazioni Generali is 1.18 times more volatile than Axa SA ADR. It trades about 0.05 of its total potential returns per unit of risk. Axa SA ADR is currently generating about 0.06 per unit of volatility. If you would invest  2,372  in Axa SA ADR on January 30, 2024 and sell it today you would earn a total of  988.00  from holding Axa SA ADR or generate 41.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.51%
Values	Daily Returns

Assicurazioni Generali SpA  vs.  Axa SA ADR

Assicurazioni Generali

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Assicurazioni Generali SpA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Assicurazioni Generali reported solid returns over the last few months and may actually be approaching a breakup point.

Axa SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axa SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Axa SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Assicurazioni Generali and Axa SA

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

The idea behind Assicurazioni Generali SpA and Axa SA ADR 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.