Correlation Between Group 1 and XIAO I

Can any of the company-specific risk be diversified away by investing in both Group 1 and XIAO I 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 Group 1 and XIAO I into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Group 1 Automotive and XIAO I American, you can compare the effects of market volatilities on Group 1 and XIAO I 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 Group 1 with a short position of XIAO I. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and XIAO I.

Diversification Opportunities for Group 1 and XIAO I

0.28

Correlation Coefficient

Group 1  XIAO I

Modest diversification

The 3 months correlation between Group and XIAO is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and XIAO I American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XIAO I American and Group 1 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 Group 1 Automotive are associated (or correlated) with XIAO I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XIAO I American has no effect on the direction of Group 1 i.e., Group 1 and XIAO I go up and down completely randomly.

Pair Corralation between Group 1 and XIAO I

Considering the 90-day investment horizon Group 1 Automotive is expected to generate 0.27 times more return on investment than XIAO I. However, Group 1 Automotive is 3.71 times less risky than XIAO I. It trades about 0.09 of its potential returns per unit of risk. XIAO I American is currently generating about -0.03 per unit of risk. If you would invest  19,436  in Group 1 Automotive on October 11, 2024 and sell it today you would earn a total of  22,634  from holding Group 1 Automotive or generate 116.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.35%
Values	Daily Returns

Group 1 Automotive  vs.  XIAO I American

Group 1 Automotive

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Group 1 Automotive are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Group 1 demonstrated solid returns over the last few months and may actually be approaching a breakup point.

XIAO I American

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XIAO I American are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, XIAO I may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Group 1 and XIAO I

The main advantage of trading using opposite Group 1 and XIAO I positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, XIAO I 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 XIAO I will offset losses from the drop in XIAO I's long position.

The idea behind Group 1 Automotive and XIAO I American 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..