Correlation Between Xander International and Advanced Ceramic

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

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

Diversification Opportunities for Xander International and Advanced Ceramic

0.23

Correlation Coefficient

Xander International  Advanced Ceramic

Modest diversification

The 3 months correlation between Xander and Advanced is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Xander International and Advanced Ceramic X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Ceramic X and Xander International 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 Xander International are associated (or correlated) with Advanced Ceramic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Ceramic X has no effect on the direction of Xander International i.e., Xander International and Advanced Ceramic go up and down completely randomly.

Pair Corralation between Xander International and Advanced Ceramic

Assuming the 90 days trading horizon Xander International is expected to generate 1.13 times more return on investment than Advanced Ceramic. However, Xander International is 1.13 times more volatile than Advanced Ceramic X. It trades about 0.09 of its potential returns per unit of risk. Advanced Ceramic X is currently generating about 0.05 per unit of risk. If you would invest  2,025  in Xander International on September 13, 2024 and sell it today you would earn a total of  300.00  from holding Xander International or generate 14.81% return on investment over 90 days.

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

Xander International  vs.  Advanced Ceramic X

Xander International

Risk-Adjusted Performance

7 of 100

OK

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

Advanced Ceramic X

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Ceramic X are ranked lower than 3 (%) 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.

Pair Trading with Xander International and Advanced Ceramic

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

The idea behind Xander International and Advanced Ceramic X 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.