Correlation Between Xsabx and Stone Ridge

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

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

Diversification Opportunities for Xsabx and Stone Ridge

0.87

Correlation Coefficient

Xsabx  Stone Ridge

Very poor diversification

The 3 months correlation between Xsabx and Stone is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Xsabx and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified and Xsabx 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 Xsabx are associated (or correlated) with Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Xsabx i.e., Xsabx and Stone Ridge go up and down completely randomly.

Pair Corralation between Xsabx and Stone Ridge

Assuming the 90 days horizon Xsabx is expected to generate 29.6 times more return on investment than Stone Ridge. However, Xsabx is 29.6 times more volatile than Stone Ridge Diversified. It trades about 0.07 of its potential returns per unit of risk. Stone Ridge Diversified is currently generating about 0.13 per unit of risk. If you would invest  432.00  in Xsabx on October 24, 2024 and sell it today you would earn a total of  569.00  from holding Xsabx or generate 131.71% return on investment over 90 days.

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

Xsabx  vs.  Stone Ridge Diversified

Xsabx

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xsabx are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Xsabx may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Stone Ridge Diversified

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge Diversified are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xsabx and Stone Ridge

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

The idea behind Xsabx and Stone Ridge Diversified 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.