Correlation Between MF Bancorp and Axos Financial

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

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

Diversification Opportunities for MF Bancorp and Axos Financial

0.57

Correlation Coefficient

MF Bancorp  Axos Financial

Very weak diversification

The 3 months correlation between MFBP and Axos is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding MF Bancorp and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial and MF Bancorp 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 MF Bancorp 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 MF Bancorp i.e., MF Bancorp and Axos Financial go up and down completely randomly.

Pair Corralation between MF Bancorp and Axos Financial

Given the investment horizon of 90 days MF Bancorp is expected to generate 0.83 times more return on investment than Axos Financial. However, MF Bancorp is 1.2 times less risky than Axos Financial. It trades about 0.15 of its potential returns per unit of risk. Axos Financial is currently generating about -0.05 per unit of risk. If you would invest  1,230  in MF Bancorp on January 28, 2024 and sell it today you would earn a total of  27.00  from holding MF Bancorp or generate 2.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	57.14%
Values	Daily Returns

MF Bancorp  vs.  Axos Financial

MF Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MF Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in May 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 MF Bancorp and Axos Financial

The main advantage of trading using opposite MF Bancorp and Axos Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MF Bancorp 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 MF Bancorp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.