Correlation Between Xero and Kinaxis

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

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

Diversification Opportunities for Xero and Kinaxis

-0.6

Correlation Coefficient

Xero  Kinaxis

Excellent diversification

The 3 months correlation between Xero and Kinaxis is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Xero Limited and Kinaxis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinaxis and Xero 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 Xero Limited are associated (or correlated) with Kinaxis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinaxis has no effect on the direction of Xero i.e., Xero and Kinaxis go up and down completely randomly.

Pair Corralation between Xero and Kinaxis

Assuming the 90 days horizon Xero Limited is expected to generate 1.57 times more return on investment than Kinaxis. However, Xero is 1.57 times more volatile than Kinaxis. It trades about 0.0 of its potential returns per unit of risk. Kinaxis is currently generating about -0.08 per unit of risk. If you would invest  10,605  in Xero Limited on December 19, 2024 and sell it today you would lose (279.00) from holding Xero Limited or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Xero Limited  vs.  Kinaxis

Xero Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xero Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Xero is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Kinaxis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinaxis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Xero and Kinaxis

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

The idea behind Xero Limited and Kinaxis 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.