Correlation Between Waters and Xponential Fitness

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

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

Diversification Opportunities for Waters and Xponential Fitness

0.53

Correlation Coefficient

Waters  Xponential Fitness

Very weak diversification

The 3 months correlation between Waters and Xponential is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Xponential Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xponential Fitness and Waters 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 Waters 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 Waters i.e., Waters and Xponential Fitness go up and down completely randomly.

Pair Corralation between Waters and Xponential Fitness

Considering the 90-day investment horizon Waters is expected to generate 3.65 times less return on investment than Xponential Fitness. But when comparing it to its historical volatility, Waters is 1.68 times less risky than Xponential Fitness. It trades about 0.04 of its potential returns per unit of risk. Xponential Fitness is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,249  in Xponential Fitness on October 8, 2024 and sell it today you would earn a total of  277.00  from holding Xponential Fitness or generate 22.18% return on investment over 90 days.

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

Waters  vs.  Xponential Fitness

Waters

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Xponential Fitness

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Xponential Fitness are ranked lower than 6 (%) 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 Waters and Xponential Fitness

The main advantage of trading using opposite Waters and Xponential Fitness positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waters 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 Waters 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.