Correlation Between Celestia and XUC

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

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

Diversification Opportunities for Celestia and XUC

0.78

Correlation Coefficient

Celestia  XUC

Poor diversification

The 3 months correlation between Celestia and XUC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Celestia and XUC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XUC and Celestia 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 Celestia are associated (or correlated) with XUC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XUC has no effect on the direction of Celestia i.e., Celestia and XUC go up and down completely randomly.

Pair Corralation between Celestia and XUC

Assuming the 90 days trading horizon Celestia is expected to generate 1.95 times more return on investment than XUC. However, Celestia is 1.95 times more volatile than XUC. It trades about 0.12 of its potential returns per unit of risk. XUC is currently generating about 0.18 per unit of risk. If you would invest  451.00  in Celestia on September 12, 2024 and sell it today you would earn a total of  218.00  from holding Celestia or generate 48.34% return on investment over 90 days.

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

Celestia  vs.  XUC

Celestia

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Celestia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Celestia exhibited solid returns over the last few months and may actually be approaching a breakup point.

XUC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in XUC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, XUC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Celestia and XUC

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

The idea behind Celestia and XUC 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.