Correlation Between Superior Plus and XAAR PLC

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

By analyzing existing cross correlation between Superior Plus Corp and XAAR PLC LS 10, you can compare the effects of market volatilities on Superior Plus and XAAR PLC 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 Superior Plus with a short position of XAAR PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Superior Plus and XAAR PLC.

Diversification Opportunities for Superior Plus and XAAR PLC

0.53

Correlation Coefficient

Superior Plus  XAAR PLC

Very weak diversification

The 3 months correlation between Superior and XAAR is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and XAAR PLC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAAR PLC LS and Superior Plus 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 Superior Plus Corp are associated (or correlated) with XAAR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAAR PLC LS has no effect on the direction of Superior Plus i.e., Superior Plus and XAAR PLC go up and down completely randomly.

Pair Corralation between Superior Plus and XAAR PLC

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the XAAR PLC. But the stock apears to be less risky and, when comparing its historical volatility, Superior Plus Corp is 1.23 times less risky than XAAR PLC. The stock trades about -0.07 of its potential returns per unit of risk. The XAAR PLC LS 10 is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  136.00  in XAAR PLC LS 10 on October 9, 2024 and sell it today you would lose (40.00) from holding XAAR PLC LS 10 or give up 29.41% of portfolio value over 90 days.

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

Superior Plus Corp  vs.  XAAR PLC LS 10

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

XAAR PLC LS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XAAR PLC LS 10 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 nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Superior Plus and XAAR PLC

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

The idea behind Superior Plus Corp and XAAR PLC LS 10 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.