Correlation Between XIAO I and Tandem Diabetes

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

By analyzing existing cross correlation between XIAO I American and Tandem Diabetes Care, you can compare the effects of market volatilities on XIAO I and Tandem Diabetes 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 XIAO I with a short position of Tandem Diabetes. Check out your portfolio center. Please also check ongoing floating volatility patterns of XIAO I and Tandem Diabetes.

Diversification Opportunities for XIAO I and Tandem Diabetes

0.21

Correlation Coefficient

XIAO I  Tandem Diabetes

Modest diversification

The 3 months correlation between XIAO and Tandem is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding XIAO I American and Tandem Diabetes Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandem Diabetes Care and XIAO I 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 XIAO I American are associated (or correlated) with Tandem Diabetes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandem Diabetes Care has no effect on the direction of XIAO I i.e., XIAO I and Tandem Diabetes go up and down completely randomly.

Pair Corralation between XIAO I and Tandem Diabetes

Given the investment horizon of 90 days XIAO I American is expected to under-perform the Tandem Diabetes. In addition to that, XIAO I is 1.81 times more volatile than Tandem Diabetes Care. It trades about -0.03 of its total potential returns per unit of risk. Tandem Diabetes Care is currently generating about 0.02 per unit of volatility. If you would invest  4,116  in Tandem Diabetes Care on October 10, 2024 and sell it today you would lose (411.00) from holding Tandem Diabetes Care or give up 9.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

XIAO I American  vs.  Tandem Diabetes Care

XIAO I American

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XIAO I American are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, XIAO I demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tandem Diabetes Care

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tandem Diabetes Care are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Tandem Diabetes is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with XIAO I and Tandem Diabetes

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

The idea behind XIAO I American and Tandem Diabetes Care 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.