Correlation Between MARKET VECTR and Xero

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

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

Diversification Opportunities for MARKET VECTR and Xero

0.73

Correlation Coefficient

MARKET VECTR  Xero

Poor diversification

The 3 months correlation between MARKET and Xero is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MARKET VECTR RETAIL and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and MARKET VECTR 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 MARKET VECTR RETAIL are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of MARKET VECTR i.e., MARKET VECTR and Xero go up and down completely randomly.

Pair Corralation between MARKET VECTR and Xero

Assuming the 90 days trading horizon MARKET VECTR RETAIL is expected to under-perform the Xero. But the stock apears to be less risky and, when comparing its historical volatility, MARKET VECTR RETAIL is 2.08 times less risky than Xero. The stock trades about -0.13 of its potential returns per unit of risk. The Xero is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  9,800  in Xero on December 20, 2024 and sell it today you would lose (700.00) from holding Xero or give up 7.14% of portfolio value over 90 days.

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

MARKET VECTR RETAIL  vs.  Xero

MARKET VECTR RETAIL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MARKET VECTR RETAIL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Xero

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xero has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with MARKET VECTR and Xero

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

The idea behind MARKET VECTR RETAIL and Xero 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.