Correlation Between Axon Enterprise and Archer Aviation

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

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

Diversification Opportunities for Axon Enterprise and Archer Aviation

0.73

Correlation Coefficient

Axon Enterprise  Archer Aviation

Poor diversification

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

Pair Corralation between Axon Enterprise and Archer Aviation

Given the investment horizon of 90 days Axon Enterprise is expected to generate 0.77 times more return on investment than Archer Aviation. However, Axon Enterprise is 1.31 times less risky than Archer Aviation. It trades about -0.01 of its potential returns per unit of risk. Archer Aviation is currently generating about -0.05 per unit of risk. If you would invest  60,558  in Axon Enterprise on January 18, 2025 and sell it today you would lose (4,605) from holding Axon Enterprise or give up 7.6% of portfolio value over 90 days.

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

Axon Enterprise  vs.  Archer Aviation

Axon Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axon Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Axon Enterprise is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Archer Aviation

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archer Aviation has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in May 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Axon Enterprise and Archer Aviation

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

The idea behind Axon Enterprise and Archer Aviation 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.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .