Correlation Between GAIA and XMX

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

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

Diversification Opportunities for GAIA and XMX

-0.27

Correlation Coefficient

GAIA  XMX

Very good diversification

The 3 months correlation between GAIA and XMX is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding GAIA and XMX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XMX and GAIA 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 GAIA are associated (or correlated) with XMX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XMX has no effect on the direction of GAIA i.e., GAIA and XMX go up and down completely randomly.

Pair Corralation between GAIA and XMX

Assuming the 90 days trading horizon GAIA is expected to under-perform the XMX. In addition to that, GAIA is 1.61 times more volatile than XMX. It trades about -0.04 of its total potential returns per unit of risk. XMX is currently generating about 0.08 per unit of volatility. If you would invest  0.00  in XMX on August 30, 2024 and sell it today you would earn a total of  0.00  from holding XMX or generate 20.0% return on investment over 90 days.

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

GAIA  vs.  XMX

GAIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for GAIA shareholders.

XMX

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XMX are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, XMX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAIA and XMX

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

The idea behind GAIA and XMX 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.