Correlation Between Xp and Horizon Technology

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

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

Diversification Opportunities for Xp and Horizon Technology

-0.6

Correlation Coefficient

Xp  Horizon Technology

Excellent diversification

The 3 months correlation between Xp and Horizon is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Horizon Technology Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Technology 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 Horizon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Technology has no effect on the direction of Xp i.e., Xp and Horizon Technology go up and down completely randomly.

Pair Corralation between Xp and Horizon Technology

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the Horizon Technology. In addition to that, Xp is 3.95 times more volatile than Horizon Technology Finance. It trades about -0.01 of its total potential returns per unit of risk. Horizon Technology Finance is currently generating about 0.04 per unit of volatility. If you would invest  2,109  in Horizon Technology Finance on October 6, 2024 and sell it today you would earn a total of  341.00  from holding Horizon Technology Finance or generate 16.17% return on investment over 90 days.

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

Xp Inc  vs.  Horizon Technology Finance

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.

Horizon Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Horizon Technology Finance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Horizon Technology is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xp and Horizon Technology

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

The idea behind Xp Inc and Horizon Technology Finance 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.