Correlation Between Almacenes Xito and Sealed Air

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

Diversification Opportunities for Almacenes Xito and Sealed Air

0.4

Correlation Coefficient

Almacenes Xito  Sealed Air

Very weak diversification

The 3 months correlation between Almacenes and Sealed is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Almacenes xito SA and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air 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 Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Almacenes Xito i.e., Almacenes Xito and Sealed Air go up and down completely randomly.

Pair Corralation between Almacenes Xito and Sealed Air

Given the investment horizon of 90 days Almacenes xito SA is expected to generate 1.99 times more return on investment than Sealed Air. However, Almacenes Xito is 1.99 times more volatile than Sealed Air. It trades about -0.02 of its potential returns per unit of risk. Sealed Air is currently generating about -0.1 per unit of risk. If you would invest  375.00  in Almacenes xito SA on December 5, 2024 and sell it today you would lose (28.00) from holding Almacenes xito SA or give up 7.47% of portfolio value over 90 days.

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

Almacenes xito SA  vs.  Sealed Air

Almacenes xito SA

Risk-Adjusted Performance

Very Weak

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 healthy basic indicators, Almacenes Xito is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Sealed Air

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sealed Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Almacenes Xito and Sealed Air

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

The idea behind Almacenes xito SA and Sealed Air 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.