Correlation Between ACDC Metals and Xero

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

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

Diversification Opportunities for ACDC Metals and Xero

-0.79

Correlation Coefficient

ACDC Metals  Xero

Pay attention - limited upside

The 3 months correlation between ACDC and Xero is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding ACDC Metals and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and ACDC Metals 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 ACDC Metals are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of ACDC Metals i.e., ACDC Metals and Xero go up and down completely randomly.

Pair Corralation between ACDC Metals and Xero

Assuming the 90 days trading horizon ACDC Metals is expected to under-perform the Xero. In addition to that, ACDC Metals is 3.22 times more volatile than Xero. It trades about -0.01 of its total potential returns per unit of risk. Xero is currently generating about 0.02 per unit of volatility. If you would invest  16,817  in Xero on October 23, 2024 and sell it today you would earn a total of  50.00  from holding Xero or generate 0.3% return on investment over 90 days.

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

ACDC Metals  vs.  Xero

ACDC Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ACDC Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Xero

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xero are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Xero unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ACDC Metals and Xero

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

The idea behind ACDC Metals and Xero 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 Stocks Directory module to find actively traded stocks across global markets.