Correlation Between Almacenes Xito and Leisure Fund

Can any of the company-specific risk be diversified away by investing in both Almacenes Xito and Leisure Fund 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 Fund 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 Fund Investor, you can compare the effects of market volatilities on Almacenes Xito and Leisure Fund 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 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Almacenes Xito and Leisure Fund.

Diversification Opportunities for Almacenes Xito and Leisure Fund

-0.44

Correlation Coefficient

Almacenes Xito  Leisure Fund

Very good diversification

The 3 months correlation between Almacenes and Leisure is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Almacenes xito SA and Leisure Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leisure Fund Investor 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 Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leisure Fund Investor has no effect on the direction of Almacenes Xito i.e., Almacenes Xito and Leisure Fund go up and down completely randomly.

Pair Corralation between Almacenes Xito and Leisure Fund

Given the investment horizon of 90 days Almacenes xito SA is expected to generate 2.21 times more return on investment than Leisure Fund. However, Almacenes Xito is 2.21 times more volatile than Leisure Fund Investor. It trades about 0.13 of its potential returns per unit of risk. Leisure Fund Investor is currently generating about -0.02 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	Very Weak
Accuracy	80.65%
Values	Daily Returns

Almacenes xito SA  vs.  Leisure Fund Investor

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 Fund Investor

Risk-Adjusted Performance

Weak

Over the last 90 days Leisure Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Leisure Fund 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 Fund

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

The idea behind Almacenes xito SA and Leisure Fund Investor 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.