Correlation Between XCHG Limited and Borr Drilling

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

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

Diversification Opportunities for XCHG Limited and Borr Drilling

0.3

Correlation Coefficient

XCHG Limited  Borr Drilling

Weak diversification

The 3 months correlation between XCHG and Borr is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding XCHG Limited American and Borr Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borr Drilling and XCHG Limited 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 XCHG Limited American are associated (or correlated) with Borr Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borr Drilling has no effect on the direction of XCHG Limited i.e., XCHG Limited and Borr Drilling go up and down completely randomly.

Pair Corralation between XCHG Limited and Borr Drilling

Considering the 90-day investment horizon XCHG Limited American is expected to under-perform the Borr Drilling. In addition to that, XCHG Limited is 3.92 times more volatile than Borr Drilling. It trades about -0.15 of its total potential returns per unit of risk. Borr Drilling is currently generating about -0.23 per unit of volatility. If you would invest  381.00  in Borr Drilling on December 17, 2024 and sell it today you would lose (153.00) from holding Borr Drilling or give up 40.16% of portfolio value over 90 days.

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

XCHG Limited American  vs.  Borr Drilling

XCHG Limited American

Risk-Adjusted Performance

Very Weak

Over the last 90 days XCHG Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Borr Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Borr Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with XCHG Limited and Borr Drilling

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

The idea behind XCHG Limited American and Borr Drilling 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.