Correlation Between CDL INVESTMENT and Xero

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

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

Diversification Opportunities for CDL INVESTMENT and Xero

0.5

Correlation Coefficient

CDL INVESTMENT  Xero

Very weak diversification

The 3 months correlation between CDL and Xero is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CDL INVESTMENT and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and CDL INVESTMENT 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 CDL INVESTMENT 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 CDL INVESTMENT i.e., CDL INVESTMENT and Xero go up and down completely randomly.

Pair Corralation between CDL INVESTMENT and Xero

Assuming the 90 days trading horizon CDL INVESTMENT is expected to generate 0.56 times more return on investment than Xero. However, CDL INVESTMENT is 1.77 times less risky than Xero. It trades about 0.01 of its potential returns per unit of risk. Xero is currently generating about -0.13 per unit of risk. If you would invest  44.00  in CDL INVESTMENT on October 7, 2024 and sell it today you would earn a total of  0.00  from holding CDL INVESTMENT or generate 0.0% return on investment over 90 days.

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

CDL INVESTMENT  vs.  Xero

CDL INVESTMENT

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CDL INVESTMENT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CDL INVESTMENT is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Xero

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xero are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Xero reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDL INVESTMENT and Xero

The main advantage of trading using opposite CDL INVESTMENT and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDL INVESTMENT 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 CDL INVESTMENT 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.