Correlation Between Xp and Thunder Bridge

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

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

Diversification Opportunities for Xp and Thunder Bridge

-0.78

Correlation Coefficient

Xp  Thunder Bridge

Pay attention - limited upside

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

Pair Corralation between Xp and Thunder Bridge

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the Thunder Bridge. In addition to that, Xp is 1.02 times more volatile than Thunder Bridge Capital. It trades about -0.2 of its total potential returns per unit of risk. Thunder Bridge Capital is currently generating about 0.12 per unit of volatility. If you would invest  1,052  in Thunder Bridge Capital on September 22, 2024 and sell it today you would earn a total of  172.00  from holding Thunder Bridge Capital or generate 16.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.06%
Values	Daily Returns

Xp Inc  vs.  Thunder Bridge Capital

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.

Thunder Bridge Capital

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Thunder Bridge Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively uncertain fundamental indicators, Thunder Bridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xp and Thunder Bridge

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

The idea behind Xp Inc and Thunder Bridge Capital 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.