Correlation Between Xponential Fitness and Timken

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Can any of the company-specific risk be diversified away by investing in both Xponential Fitness and Timken 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 Timken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xponential Fitness and Timken Company, you can compare the effects of market volatilities on Xponential Fitness and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xponential Fitness and Timken.

Diversification Opportunities for Xponential Fitness and Timken

-0.82
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Xponential and Timken is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Xponential Fitness and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Xponential Fitness i.e., Xponential Fitness and Timken go up and down completely randomly.

Pair Corralation between Xponential Fitness and Timken

Given the investment horizon of 90 days Xponential Fitness is expected to generate 2.95 times more return on investment than Timken. However, Xponential Fitness is 2.95 times more volatile than Timken Company. It trades about 0.02 of its potential returns per unit of risk. Timken Company is currently generating about -0.04 per unit of risk. If you would invest  1,549  in Xponential Fitness on September 20, 2024 and sell it today you would lose (170.00) from holding Xponential Fitness or give up 10.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Xponential Fitness  vs.  Timken Company

 Performance 
       Timeline  
Xponential Fitness 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Xponential Fitness are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Xponential Fitness reported solid returns over the last few months and may actually be approaching a breakup point.
Timken Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals 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.

Xponential Fitness and Timken Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Xponential Fitness and Timken

The main advantage of trading using opposite Xponential Fitness and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xponential Fitness position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken's long position.
The idea behind Xponential Fitness and Timken Company 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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