Correlation Between Almacenes Xito and Leisure Portfolio

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

By analyzing existing cross correlation between Almacenes xito SA and Leisure Portfolio Leisure, you can compare the effects of market volatilities on Almacenes Xito and Leisure Portfolio 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 Almacenes Xito with a short position of Leisure Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Almacenes Xito and Leisure Portfolio.

Diversification Opportunities for Almacenes Xito and Leisure Portfolio

-0.17

Correlation Coefficient

Almacenes Xito  Leisure Portfolio

Good diversification

The 3 months correlation between Almacenes and Leisure is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Almacenes xito SA and Leisure Portfolio Leisure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Portfolio Leisure and Almacenes Xito 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 Almacenes xito SA are associated (or correlated) with Leisure Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Portfolio Leisure has no effect on the direction of Almacenes Xito i.e., Almacenes Xito and Leisure Portfolio go up and down completely randomly.

Pair Corralation between Almacenes Xito and Leisure Portfolio

Given the investment horizon of 90 days Almacenes xito SA is expected to generate 1.95 times more return on investment than Leisure Portfolio. However, Almacenes Xito is 1.95 times more volatile than Leisure Portfolio Leisure. It trades about 0.13 of its potential returns per unit of risk. Leisure Portfolio Leisure is currently generating about -0.06 per unit of risk. If you would invest  300.00  in Almacenes xito SA on December 30, 2024 and sell it today you would earn a total of  47.00  from holding Almacenes xito SA or generate 15.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.65%
Values	Daily Returns

Almacenes xito SA  vs.  Leisure Portfolio Leisure

Almacenes xito SA

Risk-Adjusted Performance

OK

Over the last 90 days Almacenes xito SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very weak basic indicators, Almacenes Xito displayed solid returns over the last few months and may actually be approaching a breakup point.

Leisure Portfolio Leisure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leisure Portfolio Leisure has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Leisure Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Almacenes Xito and Leisure Portfolio

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

The idea behind Almacenes xito SA and Leisure Portfolio Leisure 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.