Correlation Between Xp and SWK Holdings

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

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

Diversification Opportunities for Xp and SWK Holdings

-0.76

Correlation Coefficient

Xp  SWK Holdings

Pay attention - limited upside

The 3 months correlation between Xp and SWK is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and SWK Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWK Holdings 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 SWK Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWK Holdings has no effect on the direction of Xp i.e., Xp and SWK Holdings go up and down completely randomly.

Pair Corralation between Xp and SWK Holdings

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the SWK Holdings. In addition to that, Xp is 5.8 times more volatile than SWK Holdings. It trades about -0.03 of its total potential returns per unit of risk. SWK Holdings is currently generating about 0.24 per unit of volatility. If you would invest  2,520  in SWK Holdings on October 22, 2024 and sell it today you would earn a total of  34.00  from holding SWK Holdings or generate 1.35% 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.  SWK Holdings

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.

SWK Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWK Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical indicators, SWK Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Xp and SWK Holdings

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

The idea behind Xp Inc and SWK Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.