Correlation Between Axos Financial and First Financial

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

By analyzing existing cross correlation between Axos Financial and First Financial Bancorp, you can compare the effects of market volatilities on Axos Financial and First 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 Axos Financial with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axos Financial and First Financial.

Diversification Opportunities for Axos Financial and First Financial

0.77

Correlation Coefficient

Axos Financial  First Financial

Poor diversification

The 3 months correlation between Axos and First is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bancorp and Axos Financial 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 Axos Financial are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bancorp has no effect on the direction of Axos Financial i.e., Axos Financial and First Financial go up and down completely randomly.

Pair Corralation between Axos Financial and First Financial

Allowing for the 90-day total investment horizon Axos Financial is expected to generate 1.65 times more return on investment than First Financial. However, Axos Financial is 1.65 times more volatile than First Financial Bancorp. It trades about 0.19 of its potential returns per unit of risk. First Financial Bancorp is currently generating about 0.17 per unit of risk. If you would invest  5,153  in Axos Financial on February 7, 2024 and sell it today you would earn a total of  600.00  from holding Axos Financial or generate 11.64% return on investment over 90 days.

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

Axos Financial  vs.  First Financial Bancorp

Axos Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axos Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Axos Financial showed solid returns over the last few months and may actually be approaching a breakup point.

First Financial Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, First Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Axos Financial and First Financial

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

The idea behind Axos Financial and First Financial Bancorp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.