Correlation Between Xp and Nabors Energy

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

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

Diversification Opportunities for Xp and Nabors Energy

-0.78

Correlation Coefficient

Xp  Nabors Energy

Pay attention - limited upside

The 3 months correlation between Xp and Nabors is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Nabors Energy Transition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Energy Transition 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 Nabors Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Energy Transition has no effect on the direction of Xp i.e., Xp and Nabors Energy go up and down completely randomly.

Pair Corralation between Xp and Nabors Energy

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the Nabors Energy. But the stock apears to be less risky and, when comparing its historical volatility, Xp Inc is 3.62 times less risky than Nabors Energy. The stock trades about -0.33 of its potential returns per unit of risk. The Nabors Energy Transition is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Nabors Energy Transition on September 22, 2024 and sell it today you would earn a total of  5.00  from holding Nabors Energy Transition or generate 45.45% 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.  Nabors Energy Transition

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 January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Nabors Energy Transition

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nabors Energy Transition are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Nabors Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xp and Nabors Energy

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

The idea behind Xp Inc and Nabors Energy Transition 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 Transaction History module to view history of all your transactions and understand their impact on performance.