Correlation Between Talon International and Xcel Brands

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

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

Diversification Opportunities for Talon International and Xcel Brands

0.71

Correlation Coefficient

Talon International  Xcel Brands

Poor diversification

The 3 months correlation between Talon and Xcel is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Talon International and Xcel Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Brands and Talon International 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 Talon International are associated (or correlated) with Xcel Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Brands has no effect on the direction of Talon International i.e., Talon International and Xcel Brands go up and down completely randomly.

Pair Corralation between Talon International and Xcel Brands

Given the investment horizon of 90 days Talon International is expected to generate 1.64 times more return on investment than Xcel Brands. However, Talon International is 1.64 times more volatile than Xcel Brands. It trades about 0.27 of its potential returns per unit of risk. Xcel Brands is currently generating about 0.01 per unit of risk. If you would invest  11.00  in Talon International on October 11, 2024 and sell it today you would earn a total of  4.00  from holding Talon International or generate 36.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	2.83%
Values	Daily Returns

Talon International  vs.  Xcel Brands

Talon International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Talon International is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Xcel Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xcel Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Talon International and Xcel Brands

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

The idea behind Talon International and Xcel Brands 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.