Correlation Between Cboe UK and Xeros Technology

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

By analyzing existing cross correlation between Cboe UK Consumer and Xeros Technology Group, you can compare the effects of market volatilities on Cboe UK and Xeros Technology 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 Cboe UK with a short position of Xeros Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe UK and Xeros Technology.

Diversification Opportunities for Cboe UK and Xeros Technology

-0.87

Correlation Coefficient

Cboe UK  Xeros Technology

Pay attention - limited upside

The 3 months correlation between Cboe and Xeros is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and Xeros Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xeros Technology and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with Xeros Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xeros Technology has no effect on the direction of Cboe UK i.e., Cboe UK and Xeros Technology go up and down completely randomly.

Pair Corralation between Cboe UK and Xeros Technology

Assuming the 90 days trading horizon Cboe UK Consumer is expected to generate 0.31 times more return on investment than Xeros Technology. However, Cboe UK Consumer is 3.28 times less risky than Xeros Technology. It trades about 0.15 of its potential returns per unit of risk. Xeros Technology Group is currently generating about -0.25 per unit of risk. If you would invest  2,929,740  in Cboe UK Consumer on September 27, 2024 and sell it today you would earn a total of  262,684  from holding Cboe UK Consumer or generate 8.97% return on investment over 90 days.

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

Cboe UK Consumer  vs.  Xeros Technology Group

Pair Trading with Cboe UK and Xeros Technology

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

The idea behind Cboe UK Consumer and Xeros Technology Group 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.