Correlation Between Xerox Corp and Innodata

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

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

Diversification Opportunities for Xerox Corp and Innodata

-0.52

Correlation Coefficient

Xerox Corp  Innodata

Excellent diversification

The 3 months correlation between Xerox and Innodata is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Xerox Corp and Innodata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodata and Xerox Corp 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 Xerox Corp are associated (or correlated) with Innodata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodata has no effect on the direction of Xerox Corp i.e., Xerox Corp and Innodata go up and down completely randomly.

Pair Corralation between Xerox Corp and Innodata

Considering the 90-day investment horizon Xerox Corp is expected to generate 0.44 times more return on investment than Innodata. However, Xerox Corp is 2.29 times less risky than Innodata. It trades about 0.05 of its potential returns per unit of risk. Innodata is currently generating about -0.13 per unit of risk. If you would invest  918.00  in Xerox Corp on October 22, 2024 and sell it today you would earn a total of  16.00  from holding Xerox Corp or generate 1.74% return on investment over 90 days.

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

Xerox Corp  vs.  Innodata

Xerox Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xerox Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Xerox Corp is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Innodata

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innodata are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Innodata exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xerox Corp and Innodata

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

The idea behind Xerox Corp and Innodata 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.