Correlation Between Netcapital and Xp

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

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

Diversification Opportunities for Netcapital and Xp

0.16

Correlation Coefficient

Netcapital  Xp

Average diversification

The 3 months correlation between Netcapital and Xp is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital and Xp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xp Inc and Netcapital 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 Netcapital are associated (or correlated) with Xp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xp Inc has no effect on the direction of Netcapital i.e., Netcapital and Xp go up and down completely randomly.

Pair Corralation between Netcapital and Xp

Given the investment horizon of 90 days Netcapital is expected to under-perform the Xp. In addition to that, Netcapital is 1.56 times more volatile than Xp Inc. It trades about -0.05 of its total potential returns per unit of risk. Xp Inc is currently generating about 0.16 per unit of volatility. If you would invest  1,178  in Xp Inc on December 28, 2024 and sell it today you would earn a total of  289.00  from holding Xp Inc or generate 24.53% return on investment over 90 days.

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

Netcapital  vs.  Xp Inc

Netcapital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Netcapital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Xp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xp Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Xp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netcapital and Xp

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

The idea behind Netcapital and Xp Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.