Correlation Between Xponential Fitness and Arcos Dorados

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

By analyzing existing cross correlation between Xponential Fitness and Arcos Dorados Holdings, you can compare the effects of market volatilities on Xponential Fitness and Arcos Dorados 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 Xponential Fitness with a short position of Arcos Dorados. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xponential Fitness and Arcos Dorados.

Diversification Opportunities for Xponential Fitness and Arcos Dorados

-0.2

Correlation Coefficient

Xponential Fitness  Arcos Dorados

Good diversification

The 3 months correlation between Xponential and Arcos is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Xponential Fitness and Arcos Dorados Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcos Dorados Holdings and Xponential Fitness 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 Xponential Fitness are associated (or correlated) with Arcos Dorados. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcos Dorados Holdings has no effect on the direction of Xponential Fitness i.e., Xponential Fitness and Arcos Dorados go up and down completely randomly.

Pair Corralation between Xponential Fitness and Arcos Dorados

Given the investment horizon of 90 days Xponential Fitness is expected to under-perform the Arcos Dorados. In addition to that, Xponential Fitness is 3.32 times more volatile than Arcos Dorados Holdings. It trades about -0.06 of its total potential returns per unit of risk. Arcos Dorados Holdings is currently generating about 0.11 per unit of volatility. If you would invest  716.00  in Arcos Dorados Holdings on December 29, 2024 and sell it today you would earn a total of  99.00  from holding Arcos Dorados Holdings or generate 13.83% return on investment over 90 days.

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

Xponential Fitness  vs.  Arcos Dorados Holdings

Xponential Fitness

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xponential Fitness has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Arcos Dorados Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arcos Dorados Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Arcos Dorados displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xponential Fitness and Arcos Dorados

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

The idea behind Xponential Fitness and Arcos Dorados 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.