Correlation Between BAXALTA and Xponential Fitness

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

By analyzing existing cross correlation between BAXALTA INC 4 and Xponential Fitness, you can compare the effects of market volatilities on BAXALTA and Xponential Fitness 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 BAXALTA with a short position of Xponential Fitness. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAXALTA and Xponential Fitness.

Diversification Opportunities for BAXALTA and Xponential Fitness

0.32

Correlation Coefficient

BAXALTA  Xponential Fitness

Weak diversification

The 3 months correlation between BAXALTA and Xponential is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding BAXALTA INC 4 and Xponential Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xponential Fitness and BAXALTA 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 BAXALTA INC 4 are associated (or correlated) with Xponential Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xponential Fitness has no effect on the direction of BAXALTA i.e., BAXALTA and Xponential Fitness go up and down completely randomly.

Pair Corralation between BAXALTA and Xponential Fitness

Assuming the 90 days trading horizon BAXALTA is expected to generate 23.3 times less return on investment than Xponential Fitness. But when comparing it to its historical volatility, BAXALTA INC 4 is 60.44 times less risky than Xponential Fitness. It trades about 0.09 of its potential returns per unit of risk. Xponential Fitness is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,300  in Xponential Fitness on September 24, 2024 and sell it today you would earn a total of  83.00  from holding Xponential Fitness or generate 6.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.58%
Values	Daily Returns

BAXALTA INC 4  vs.  Xponential Fitness

BAXALTA INC 4

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BAXALTA INC 4 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BAXALTA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Xponential Fitness

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xponential Fitness are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Xponential Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BAXALTA and Xponential Fitness

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

The idea behind BAXALTA INC 4 and Xponential Fitness 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .