Correlation Between XMX and GAIA

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

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

Diversification Opportunities for XMX and GAIA

-0.28

Correlation Coefficient

XMX  GAIA

Very good diversification

The 3 months correlation between XMX and GAIA is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding XMX and GAIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAIA and XMX 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 XMX are associated (or correlated) with GAIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAIA has no effect on the direction of XMX i.e., XMX and GAIA go up and down completely randomly.

Pair Corralation between XMX and GAIA

Assuming the 90 days trading horizon XMX is expected to under-perform the GAIA. But the crypto coin apears to be less risky and, when comparing its historical volatility, XMX is 1.8 times less risky than GAIA. The crypto coin trades about -0.09 of its potential returns per unit of risk. The GAIA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.20  in GAIA on November 27, 2024 and sell it today you would lose  0.00  from holding GAIA or give up 0.05% of portfolio value over 90 days.

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

XMX  vs.  GAIA

XMX

Risk-Adjusted Performance

Very Weak

Over the last 90 days XMX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for XMX shareholders.

GAIA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GAIA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, GAIA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XMX and GAIA

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

The idea behind XMX and GAIA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.