Correlation Between Small Cap and Almacenes Xito

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

By analyzing existing cross correlation between Small Cap Premium and Almacenes xito SA, you can compare the effects of market volatilities on Small Cap and Almacenes Xito 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 Small Cap with a short position of Almacenes Xito. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Almacenes Xito.

Diversification Opportunities for Small Cap and Almacenes Xito

-0.65

Correlation Coefficient

Small Cap  Almacenes Xito

Excellent diversification

The 3 months correlation between Small and Almacenes is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Almacenes xito SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Almacenes xito SA and Small Cap 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 Small Cap Premium are associated (or correlated) with Almacenes Xito. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Almacenes xito SA has no effect on the direction of Small Cap i.e., Small Cap and Almacenes Xito go up and down completely randomly.

Pair Corralation between Small Cap and Almacenes Xito

Considering the 90-day investment horizon Small Cap is expected to generate 9.4 times less return on investment than Almacenes Xito. But when comparing it to its historical volatility, Small Cap Premium is 6.68 times less risky than Almacenes Xito. It trades about 0.1 of its potential returns per unit of risk. Almacenes xito SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  300.00  in Almacenes xito SA on December 28, 2024 and sell it today you would earn a total of  47.00  from holding Almacenes xito SA or generate 15.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	81.97%
Values	Daily Returns

Small Cap Premium  vs.  Almacenes xito SA

Small Cap Premium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Almacenes xito SA

Risk-Adjusted Performance

OK

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 weak basic indicators, Almacenes Xito displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small Cap and Almacenes Xito

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

The idea behind Small Cap Premium and Almacenes xito SA 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.