Correlation Between Xp and Mars Acquisition

Can any of the company-specific risk be diversified away by investing in both Xp and Mars 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 Mars 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 Mars Acquisition Corp, you can compare the effects of market volatilities on Xp and Mars 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 Mars Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xp and Mars Acquisition.

Diversification Opportunities for Xp and Mars Acquisition

-0.77

Correlation Coefficient

Xp  Mars Acquisition

Pay attention - limited upside

The 3 months correlation between Xp and Mars is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Mars Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mars Acquisition 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 Mars Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mars Acquisition Corp has no effect on the direction of Xp i.e., Xp and Mars Acquisition go up and down completely randomly.

Pair Corralation between Xp and Mars Acquisition

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the Mars Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Xp Inc is 4.47 times less risky than Mars Acquisition. The stock trades about -0.27 of its potential returns per unit of risk. The Mars Acquisition Corp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Mars Acquisition Corp on September 19, 2024 and sell it today you would earn a total of  13.00  from holding Mars Acquisition Corp or generate 52.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	42.19%
Values	Daily Returns

Xp Inc  vs.  Mars Acquisition Corp

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 conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Mars Acquisition Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mars Acquisition Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Mars Acquisition reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xp and Mars Acquisition

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

The idea behind Xp Inc and Mars 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.