Correlation Between Xp and AFC Gamma

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

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

Diversification Opportunities for Xp and AFC Gamma

-0.39

Correlation Coefficient

Xp  AFC Gamma

Very good diversification

The 3 months correlation between Xp and AFC is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and AFC Gamma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Gamma and Xp 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 Xp Inc are associated (or correlated) with AFC Gamma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Gamma has no effect on the direction of Xp i.e., Xp and AFC Gamma go up and down completely randomly.

Pair Corralation between Xp and AFC Gamma

Allowing for the 90-day total investment horizon Xp Inc is expected to generate 0.78 times more return on investment than AFC Gamma. However, Xp Inc is 1.28 times less risky than AFC Gamma. It trades about 0.13 of its potential returns per unit of risk. AFC Gamma is currently generating about -0.14 per unit of risk. If you would invest  1,218  in Xp Inc on December 25, 2024 and sell it today you would earn a total of  245.00  from holding Xp Inc or generate 20.11% return on investment over 90 days.

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

Xp Inc  vs.  AFC Gamma

Xp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xp Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Xp reported solid returns over the last few months and may actually be approaching a breakup point.

AFC Gamma

Risk-Adjusted Performance

Very Weak

Over the last 90 days AFC Gamma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Xp and AFC Gamma

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

The idea behind Xp Inc and AFC Gamma 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 Transaction History module to view history of all your transactions and understand their impact on performance.