Correlation Between Solus Advanced and Xavis

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

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

Diversification Opportunities for Solus Advanced and Xavis

0.83

Correlation Coefficient

Solus Advanced  Xavis

Very poor diversification

The 3 months correlation between Solus and Xavis is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Solus Advanced Materials and Xavis Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xavis and Solus Advanced 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 Solus Advanced Materials 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 Solus Advanced i.e., Solus Advanced and Xavis go up and down completely randomly.

Pair Corralation between Solus Advanced and Xavis

Assuming the 90 days trading horizon Solus Advanced Materials is expected to generate 0.98 times more return on investment than Xavis. However, Solus Advanced Materials is 1.02 times less risky than Xavis. It trades about -0.21 of its potential returns per unit of risk. Xavis Co is currently generating about -0.22 per unit of risk. If you would invest  1,186,000  in Solus Advanced Materials on October 7, 2024 and sell it today you would lose (314,000) from holding Solus Advanced Materials or give up 26.48% of portfolio value over 90 days.

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

Solus Advanced Materials  vs.  Xavis Co

Solus Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solus Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xavis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xavis Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Solus Advanced and Xavis

The main advantage of trading using opposite Solus Advanced and Xavis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solus Advanced 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 Solus Advanced Materials 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.