Correlation Between FOODWELL and Xavis

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

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

Diversification Opportunities for FOODWELL and Xavis

0.59

Correlation Coefficient

FOODWELL  Xavis

Very weak diversification

The 3 months correlation between FOODWELL and Xavis is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding FOODWELL Co and Xavis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xavis and FOODWELL 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 FOODWELL Co are associated (or correlated) with Xavis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xavis has no effect on the direction of FOODWELL i.e., FOODWELL and Xavis go up and down completely randomly.

Pair Corralation between FOODWELL and Xavis

Assuming the 90 days trading horizon FOODWELL is expected to generate 17.16 times less return on investment than Xavis. But when comparing it to its historical volatility, FOODWELL Co is 1.49 times less risky than Xavis. It trades about 0.01 of its potential returns per unit of risk. Xavis Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  126,900  in Xavis Co on December 25, 2024 and sell it today you would earn a total of  40,000  from holding Xavis Co or generate 31.52% return on investment over 90 days.

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

FOODWELL Co  vs.  Xavis Co

FOODWELL

Risk-Adjusted Performance

Very Weak

Over the last 90 days FOODWELL Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FOODWELL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Xavis

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xavis Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Xavis sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FOODWELL and Xavis

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

The idea behind FOODWELL Co and Xavis Co 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.