Correlation Between Xavis and SGA Solutions

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

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

Diversification Opportunities for Xavis and SGA Solutions

-0.02

Correlation Coefficient

Xavis  SGA Solutions

Good diversification

The 3 months correlation between Xavis and SGA is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Xavis Co and SGA Solutions CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGA Solutions CoLtd and Xavis 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 Xavis Co are associated (or correlated) with SGA Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGA Solutions CoLtd has no effect on the direction of Xavis i.e., Xavis and SGA Solutions go up and down completely randomly.

Pair Corralation between Xavis and SGA Solutions

Assuming the 90 days trading horizon Xavis Co is expected to generate 2.59 times more return on investment than SGA Solutions. However, Xavis is 2.59 times more volatile than SGA Solutions CoLtd. It trades about 0.1 of its potential returns per unit of risk. SGA Solutions CoLtd is currently generating about 0.04 per unit of risk. If you would invest  129,100  in Xavis Co on December 23, 2024 and sell it today you would earn a total of  29,000  from holding Xavis Co or generate 22.46% return on investment over 90 days.

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

Xavis Co  vs.  SGA Solutions CoLtd

Xavis

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xavis Co are ranked lower than 7 (%) 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.

SGA Solutions CoLtd

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SGA Solutions CoLtd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SGA Solutions is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xavis and SGA Solutions

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

The idea behind Xavis Co and SGA Solutions CoLtd 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.