Correlation Between Borr Drilling and XCHG Limited

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

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

Diversification Opportunities for Borr Drilling and XCHG Limited

0.17

Correlation Coefficient

Borr Drilling  XCHG Limited

Average diversification

The 3 months correlation between Borr and XCHG is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Borr Drilling and XCHG Limited American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XCHG Limited American and Borr Drilling 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 Borr Drilling are associated (or correlated) with XCHG Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XCHG Limited American has no effect on the direction of Borr Drilling i.e., Borr Drilling and XCHG Limited go up and down completely randomly.

Pair Corralation between Borr Drilling and XCHG Limited

Given the investment horizon of 90 days Borr Drilling is expected to generate 0.12 times more return on investment than XCHG Limited. However, Borr Drilling is 8.31 times less risky than XCHG Limited. It trades about 0.12 of its potential returns per unit of risk. XCHG Limited American is currently generating about -0.18 per unit of risk. If you would invest  363.00  in Borr Drilling on October 10, 2024 and sell it today you would earn a total of  23.00  from holding Borr Drilling or generate 6.34% return on investment over 90 days.

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

Borr Drilling  vs.  XCHG Limited American

Borr Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

XCHG Limited American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XCHG Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Borr Drilling and XCHG Limited

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

The idea behind Borr Drilling and XCHG Limited American 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.