Correlation Between X Square and Freedom Day

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Can any of the company-specific risk be diversified away by investing in both X Square and Freedom Day 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 X Square and Freedom Day into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X Square Balanced and Freedom Day Dividend, you can compare the effects of market volatilities on X Square and Freedom Day 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 X Square with a short position of Freedom Day. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Square and Freedom Day.

Diversification Opportunities for X Square and Freedom Day

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between SQBIX and Freedom is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding X Square Balanced and Freedom Day Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Day Dividend and X Square 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 X Square Balanced are associated (or correlated) with Freedom Day. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Day Dividend has no effect on the direction of X Square i.e., X Square and Freedom Day go up and down completely randomly.

Pair Corralation between X Square and Freedom Day

Assuming the 90 days horizon X Square Balanced is expected to generate 0.66 times more return on investment than Freedom Day. However, X Square Balanced is 1.5 times less risky than Freedom Day. It trades about 0.22 of its potential returns per unit of risk. Freedom Day Dividend is currently generating about 0.11 per unit of risk. If you would invest  1,347  in X Square Balanced on August 31, 2024 and sell it today you would earn a total of  96.00  from holding X Square Balanced or generate 7.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

X Square Balanced  vs.  Freedom Day Dividend

 Performance 
       Timeline  
X Square Balanced 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in X Square Balanced are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, X Square may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Freedom Day Dividend 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Day Dividend are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Freedom Day is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

X Square and Freedom Day Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with X Square and Freedom Day

The main advantage of trading using opposite X Square and Freedom Day positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Square position performs unexpectedly, Freedom Day 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 Freedom Day will offset losses from the drop in Freedom Day's long position.
The idea behind X Square Balanced and Freedom Day Dividend 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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