Correlation Between Xp and Finnovate Acquisition

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

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

Diversification Opportunities for Xp and Finnovate Acquisition

0.38

Correlation Coefficient

Xp  Finnovate Acquisition

Weak diversification

The 3 months correlation between Xp and Finnovate is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Finnovate Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnovate Acquisition 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 Finnovate Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnovate Acquisition has no effect on the direction of Xp i.e., Xp and Finnovate Acquisition go up and down completely randomly.

Pair Corralation between Xp and Finnovate Acquisition

Allowing for the 90-day total investment horizon Xp Inc is expected to generate 15.48 times more return on investment than Finnovate Acquisition. However, Xp is 15.48 times more volatile than Finnovate Acquisition Corp. It trades about 0.14 of its potential returns per unit of risk. Finnovate Acquisition Corp is currently generating about -0.12 per unit of risk. If you would invest  1,208  in Xp Inc on December 27, 2024 and sell it today you would earn a total of  257.00  from holding Xp Inc or generate 21.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	21.67%
Values	Daily Returns

Xp Inc  vs.  Finnovate Acquisition Corp

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.

Finnovate Acquisition

Risk-Adjusted Performance

Very Weak

Over the last 90 days Finnovate Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Finnovate Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Xp and Finnovate Acquisition

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

The idea behind Xp Inc and Finnovate Acquisition Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.