Correlation Between Ability Enterprise and XAC Automation

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

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

Diversification Opportunities for Ability Enterprise and XAC Automation

-0.12

Correlation Coefficient

Ability Enterprise  XAC Automation

Good diversification

The 3 months correlation between Ability and XAC is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ability Enterprise Co and XAC Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAC Automation and Ability 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 Ability Enterprise Co are associated (or correlated) with XAC Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAC Automation has no effect on the direction of Ability Enterprise i.e., Ability Enterprise and XAC Automation go up and down completely randomly.

Pair Corralation between Ability Enterprise and XAC Automation

Assuming the 90 days trading horizon Ability Enterprise Co is expected to generate 1.55 times more return on investment than XAC Automation. However, Ability Enterprise is 1.55 times more volatile than XAC Automation. It trades about 0.14 of its potential returns per unit of risk. XAC Automation is currently generating about -0.01 per unit of risk. If you would invest  4,750  in Ability Enterprise Co on December 4, 2024 and sell it today you would earn a total of  1,320  from holding Ability Enterprise Co or generate 27.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Ability Enterprise Co  vs.  XAC Automation

Ability Enterprise

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ability Enterprise Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Ability Enterprise showed solid returns over the last few months and may actually be approaching a breakup point.

XAC Automation

Risk-Adjusted Performance

Very Weak

Over the last 90 days XAC Automation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, XAC Automation is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ability Enterprise and XAC Automation

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

The idea behind Ability Enterprise Co and XAC Automation 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..