Correlation Between Advanced Ceramic and Xander International

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

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

Diversification Opportunities for Advanced Ceramic and Xander International

0.24

Correlation Coefficient

Advanced Ceramic  Xander International

Modest diversification

The 3 months correlation between Advanced and Xander is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Ceramic X and Xander International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xander International and Advanced Ceramic 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 Advanced Ceramic X are associated (or correlated) with Xander International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xander International has no effect on the direction of Advanced Ceramic i.e., Advanced Ceramic and Xander International go up and down completely randomly.

Pair Corralation between Advanced Ceramic and Xander International

Assuming the 90 days trading horizon Advanced Ceramic is expected to generate 2.52 times less return on investment than Xander International. But when comparing it to its historical volatility, Advanced Ceramic X is 1.14 times less risky than Xander International. It trades about 0.05 of its potential returns per unit of risk. Xander International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,025  in Xander International on September 14, 2024 and sell it today you would earn a total of  425.00  from holding Xander International or generate 20.99% return on investment over 90 days.

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

Advanced Ceramic X  vs.  Xander International

Advanced Ceramic X

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Ceramic X are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Ceramic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xander International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xander International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xander International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advanced Ceramic and Xander International

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

The idea behind Advanced Ceramic X and Xander International 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.