Correlation Between Arbor Technology and XAC Automation

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

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

Diversification Opportunities for Arbor Technology and XAC Automation

0.19

Correlation Coefficient

Arbor Technology  XAC Automation

Average diversification

The 3 months correlation between Arbor and XAC is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Technology and XAC Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAC Automation and Arbor Technology 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 Arbor Technology 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 Arbor Technology i.e., Arbor Technology and XAC Automation go up and down completely randomly.

Pair Corralation between Arbor Technology and XAC Automation

Assuming the 90 days trading horizon Arbor Technology is expected to generate 1.52 times more return on investment than XAC Automation. However, Arbor Technology is 1.52 times more volatile than XAC Automation. It trades about 0.15 of its potential returns per unit of risk. XAC Automation is currently generating about -0.04 per unit of risk. If you would invest  3,965  in Arbor Technology on September 15, 2024 and sell it today you would earn a total of  995.00  from holding Arbor Technology or generate 25.09% return on investment over 90 days.

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

Arbor Technology  vs.  XAC Automation

Arbor Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbor Technology showed solid returns over the last few months and may actually be approaching a breakup point.

XAC Automation

Risk-Adjusted Performance

0 of 100

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Arbor Technology and XAC Automation

The main advantage of trading using opposite Arbor Technology and XAC Automation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Technology 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 Arbor Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.