Correlation Between DATAGROUP and Xero

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

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

Diversification Opportunities for DATAGROUP and Xero

0.51

Correlation Coefficient

DATAGROUP  Xero

Very weak diversification

The 3 months correlation between DATAGROUP and Xero is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and DATAGROUP 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 DATAGROUP SE 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 DATAGROUP i.e., DATAGROUP and Xero go up and down completely randomly.

Pair Corralation between DATAGROUP and Xero

Assuming the 90 days trading horizon DATAGROUP SE is expected to under-perform the Xero. But the stock apears to be less risky and, when comparing its historical volatility, DATAGROUP SE is 1.23 times less risky than Xero. The stock trades about -0.02 of its potential returns per unit of risk. The Xero is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,740  in Xero on October 9, 2024 and sell it today you would earn a total of  5,460  from holding Xero or generate 115.19% return on investment over 90 days.

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

DATAGROUP SE  vs.  Xero

DATAGROUP SE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xero

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xero are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xero reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DATAGROUP and Xero

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

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.