Correlation Between XBP Europe and Rapid7

Can any of the company-specific risk be diversified away by investing in both XBP Europe and Rapid7 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 XBP Europe and Rapid7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XBP Europe Holdings and Rapid7 Inc, you can compare the effects of market volatilities on XBP Europe and Rapid7 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 XBP Europe with a short position of Rapid7. Check out your portfolio center. Please also check ongoing floating volatility patterns of XBP Europe and Rapid7.

Diversification Opportunities for XBP Europe and Rapid7

0.01

Correlation Coefficient

XBP Europe  Rapid7

Significant diversification

The 3 months correlation between XBP and Rapid7 is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding XBP Europe Holdings and Rapid7 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rapid7 Inc and XBP Europe 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 XBP Europe Holdings are associated (or correlated) with Rapid7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rapid7 Inc has no effect on the direction of XBP Europe i.e., XBP Europe and Rapid7 go up and down completely randomly.

Pair Corralation between XBP Europe and Rapid7

Assuming the 90 days horizon XBP Europe Holdings is expected to generate 8.32 times more return on investment than Rapid7. However, XBP Europe is 8.32 times more volatile than Rapid7 Inc. It trades about 0.14 of its potential returns per unit of risk. Rapid7 Inc is currently generating about -0.03 per unit of risk. If you would invest  3.39  in XBP Europe Holdings on September 21, 2024 and sell it today you would earn a total of  0.61  from holding XBP Europe Holdings or generate 17.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	68.18%
Values	Daily Returns

XBP Europe Holdings  vs.  Rapid7 Inc

XBP Europe Holdings

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in XBP Europe Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, XBP Europe showed solid returns over the last few months and may actually be approaching a breakup point.

Rapid7 Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rapid7 Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Rapid7 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with XBP Europe and Rapid7

The main advantage of trading using opposite XBP Europe and Rapid7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XBP Europe position performs unexpectedly, Rapid7 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 Rapid7 will offset losses from the drop in Rapid7's long position.

The idea behind XBP Europe Holdings and Rapid7 Inc 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.