Correlation Between Momentus and Xos Equity

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

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

Diversification Opportunities for Momentus and Xos Equity

0.3

Correlation Coefficient

Momentus  Xos Equity

Weak diversification

The 3 months correlation between Momentus and Xos is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Momentus and Xos Equity Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Equity Warrants and Momentus 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 Momentus are associated (or correlated) with Xos Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Equity Warrants has no effect on the direction of Momentus i.e., Momentus and Xos Equity go up and down completely randomly.

Pair Corralation between Momentus and Xos Equity

Given the investment horizon of 90 days Momentus is expected to generate 13.41 times less return on investment than Xos Equity. But when comparing it to its historical volatility, Momentus is 2.68 times less risky than Xos Equity. It trades about 0.06 of its potential returns per unit of risk. Xos Equity Warrants is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  0.46  in Xos Equity Warrants on October 24, 2024 and sell it today you would earn a total of  0.72  from holding Xos Equity Warrants or generate 156.52% return on investment over 90 days.

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

Momentus  vs.  Xos Equity Warrants

Momentus

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Momentus are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Momentus unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xos Equity Warrants

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xos Equity Warrants are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Xos Equity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Momentus and Xos Equity

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

The idea behind Momentus and Xos Equity Warrants 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.