Correlation Between Xp and Freedom Holding

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

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

Diversification Opportunities for Xp and Freedom Holding

0.46

Correlation Coefficient

Xp  Freedom Holding

Very weak diversification

The 3 months correlation between Xp and Freedom is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Freedom Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holding Corp 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 Freedom Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holding Corp has no effect on the direction of Xp i.e., Xp and Freedom Holding go up and down completely randomly.

Pair Corralation between Xp and Freedom Holding

Allowing for the 90-day total investment horizon Xp Inc is expected to generate 1.0 times more return on investment than Freedom Holding. However, Xp Inc is 1.0 times less risky than Freedom Holding. It trades about 0.14 of its potential returns per unit of risk. Freedom Holding Corp is currently generating about 0.06 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	Weak
Accuracy	100.0%
Values	Daily Returns

Xp Inc  vs.  Freedom Holding 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.

Freedom Holding Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Freedom Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Xp and Freedom Holding

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

The idea behind Xp Inc and Freedom Holding 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.