Correlation Between Xp and Embrace Change

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

By analyzing existing cross correlation between Xp Inc and Embrace Change Acquisition, you can compare the effects of market volatilities on Xp and Embrace Change 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 Embrace Change. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xp and Embrace Change.

Diversification Opportunities for Xp and Embrace Change

0.21

Correlation Coefficient

Xp  Embrace Change

Modest diversification

The 3 months correlation between Xp and Embrace is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Embrace Change Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embrace Change Acqui 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 Embrace Change. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embrace Change Acqui has no effect on the direction of Xp i.e., Xp and Embrace Change go up and down completely randomly.

Pair Corralation between Xp and Embrace Change

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the Embrace Change. But the stock apears to be less risky and, when comparing its historical volatility, Xp Inc is 52.28 times less risky than Embrace Change. The stock trades about -0.01 of its potential returns per unit of risk. The Embrace Change Acquisition is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Embrace Change Acquisition on October 24, 2024 and sell it today you would lose (2.48) from holding Embrace Change Acquisition or give up 24.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	35.43%
Values	Daily Returns

Xp Inc  vs.  Embrace Change Acquisition

Xp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Embrace Change Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Embrace Change Acquisition 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 technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Xp and Embrace Change

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

The idea behind Xp Inc and Embrace Change Acquisition 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 Commodity Directory module to find actively traded commodities issued by global exchanges.