Correlation Between Environmental and Xero

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

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

Diversification Opportunities for Environmental and Xero

-0.97

Correlation Coefficient

Environmental  Xero

Pay attention - limited upside

The 3 months correlation between Environmental and Xero is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding The Environmental Group and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and Environmental 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 The Environmental Group 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 Environmental i.e., Environmental and Xero go up and down completely randomly.

Pair Corralation between Environmental and Xero

Assuming the 90 days trading horizon The Environmental Group is expected to under-perform the Xero. In addition to that, Environmental is 2.22 times more volatile than Xero. It trades about -0.14 of its total potential returns per unit of risk. Xero is currently generating about 0.19 per unit of volatility. If you would invest  14,778  in Xero on October 10, 2024 and sell it today you would earn a total of  2,698  from holding Xero or generate 18.26% return on investment over 90 days.

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

The Environmental Group  vs.  Xero

The Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Environmental Group 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 essential 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

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xero are ranked lower than 14 (%) 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 Environmental and Xero

The main advantage of trading using opposite Environmental and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Environmental 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 The Environmental Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.