Correlation Between Donnelley Financial and Xp

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

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

Diversification Opportunities for Donnelley Financial and Xp

0.61

Correlation Coefficient

Donnelley Financial  Xp

Poor diversification

The 3 months correlation between Donnelley and Xp is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Donnelley Financial Solutions and Xp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xp Inc and Donnelley Financial 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 Donnelley Financial Solutions are associated (or correlated) with Xp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xp Inc has no effect on the direction of Donnelley Financial i.e., Donnelley Financial and Xp go up and down completely randomly.

Pair Corralation between Donnelley Financial and Xp

Given the investment horizon of 90 days Donnelley Financial Solutions is expected to generate 0.68 times more return on investment than Xp. However, Donnelley Financial Solutions is 1.47 times less risky than Xp. It trades about 0.06 of its potential returns per unit of risk. Xp Inc is currently generating about 0.0 per unit of risk. If you would invest  3,984  in Donnelley Financial Solutions on September 19, 2024 and sell it today you would earn a total of  2,274  from holding Donnelley Financial Solutions or generate 57.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Donnelley Financial Solutions  vs.  Xp Inc

Donnelley Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Donnelley Financial Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Xp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Donnelley Financial and Xp

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

The idea behind Donnelley Financial Solutions and Xp Inc 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.