Correlation Between Xai and WGRT

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

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

Diversification Opportunities for Xai and WGRT

-0.29

Correlation Coefficient

Xai  WGRT

Very good diversification

The 3 months correlation between Xai and WGRT is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Xai and WGRT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WGRT and Xai 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 Xai are associated (or correlated) with WGRT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WGRT has no effect on the direction of Xai i.e., Xai and WGRT go up and down completely randomly.

Pair Corralation between Xai and WGRT

Assuming the 90 days trading horizon Xai is expected to under-perform the WGRT. But the crypto coin apears to be less risky and, when comparing its historical volatility, Xai is 3.84 times less risky than WGRT. The crypto coin trades about -0.05 of its potential returns per unit of risk. The WGRT is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1.43  in WGRT on September 1, 2024 and sell it today you would lose (1.37) from holding WGRT or give up 95.91% of portfolio value over 90 days.

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

Xai  vs.  WGRT

Xai

Risk-Adjusted Performance

14 of 100

Good

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

WGRT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WGRT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady fundamental indicators, WGRT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xai and WGRT

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

The idea behind Xai and WGRT 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.