Correlation Between Deluxe and Xunlei

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

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

Diversification Opportunities for Deluxe and Xunlei

0.28

Correlation Coefficient

Deluxe  Xunlei

Modest diversification

The 3 months correlation between Deluxe and Xunlei is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr and Deluxe 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 Deluxe are associated (or correlated) with Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Deluxe i.e., Deluxe and Xunlei go up and down completely randomly.

Pair Corralation between Deluxe and Xunlei

Considering the 90-day investment horizon Deluxe is expected to generate 0.76 times more return on investment than Xunlei. However, Deluxe is 1.32 times less risky than Xunlei. It trades about 0.06 of its potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.02 per unit of risk. If you would invest  1,633  in Deluxe on September 13, 2024 and sell it today you would earn a total of  725.00  from holding Deluxe or generate 44.4% return on investment over 90 days.

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

Deluxe  vs.  Xunlei Ltd Adr

Deluxe

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Xunlei Ltd Adr

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Deluxe and Xunlei

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

The idea behind Deluxe and Xunlei Ltd Adr 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.