Correlation Between Collins Foods and Xero

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

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

Diversification Opportunities for Collins Foods and Xero

-0.44

Correlation Coefficient

Collins Foods  Xero

Very good diversification

The 3 months correlation between Collins and Xero is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and Collins Foods 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 Collins Foods 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 Collins Foods i.e., Collins Foods and Xero go up and down completely randomly.

Pair Corralation between Collins Foods and Xero

Assuming the 90 days trading horizon Collins Foods is expected to generate 9.39 times less return on investment than Xero. But when comparing it to its historical volatility, Collins Foods is 1.06 times less risky than Xero. It trades about 0.01 of its potential returns per unit of risk. Xero is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  7,063  in Xero on October 3, 2024 and sell it today you would earn a total of  9,793  from holding Xero or generate 138.65% return on investment over 90 days.

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

Collins Foods  vs.  Xero

Collins Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Foods 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 technical and 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 Collins Foods and Xero

The main advantage of trading using opposite Collins Foods and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods 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 Collins Foods 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.