Correlation Between Standard and Xpel

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

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

Diversification Opportunities for Standard and Xpel

0.61

Correlation Coefficient

Standard  Xpel

Poor diversification

The 3 months correlation between Standard and Xpel is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Standard Motor Products and Xpel Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xpel Inc and Standard 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 Standard Motor Products are associated (or correlated) with Xpel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xpel Inc has no effect on the direction of Standard i.e., Standard and Xpel go up and down completely randomly.

Pair Corralation between Standard and Xpel

Considering the 90-day investment horizon Standard Motor Products is expected to generate 0.97 times more return on investment than Xpel. However, Standard Motor Products is 1.03 times less risky than Xpel. It trades about -0.37 of its potential returns per unit of risk. Xpel Inc is currently generating about -0.52 per unit of risk. If you would invest  3,381  in Standard Motor Products on October 6, 2024 and sell it today you would lose (299.00) from holding Standard Motor Products or give up 8.84% of portfolio value over 90 days.

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

Standard Motor Products  vs.  Xpel Inc

Standard Motor Products

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Standard Motor Products are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Standard is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Xpel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xpel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Xpel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Standard and Xpel

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

The idea behind Standard Motor Products and Xpel 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.