Correlation Between Middlefield Banc and Axos Financial

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

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

Diversification Opportunities for Middlefield Banc and Axos Financial

0.7

Correlation Coefficient

Middlefield Banc  Axos Financial

Poor diversification

The 3 months correlation between Middlefield and Axos is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Middlefield Banc and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial and Middlefield Banc 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 Middlefield Banc 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 Middlefield Banc i.e., Middlefield Banc and Axos Financial go up and down completely randomly.

Pair Corralation between Middlefield Banc and Axos Financial

Given the investment horizon of 90 days Middlefield Banc is expected to under-perform the Axos Financial. In addition to that, Middlefield Banc is 1.07 times more volatile than Axos Financial. It trades about -0.24 of its total potential returns per unit of risk. Axos Financial is currently generating about -0.05 per unit of volatility. If you would invest  5,404  in Axos Financial on January 28, 2024 and sell it today you would lose (99.00) from holding Axos Financial or give up 1.83% of portfolio value over 90 days.

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

Middlefield Banc  vs.  Axos Financial

Middlefield Banc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Middlefield Banc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Axos Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Middlefield Banc and Axos Financial

The main advantage of trading using opposite Middlefield Banc and Axos Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middlefield Banc 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.

The idea behind Middlefield Banc and Axos Financial 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.