Correlation Between Xtra Energy and USCorp

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

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

Diversification Opportunities for Xtra Energy and USCorp

-0.53

Correlation Coefficient

Xtra Energy  USCorp

Excellent diversification

The 3 months correlation between Xtra and USCorp is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Xtra Energy Corp and USCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCorp and Xtra Energy 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 Xtra Energy Corp are associated (or correlated) with USCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCorp has no effect on the direction of Xtra Energy i.e., Xtra Energy and USCorp go up and down completely randomly.

Pair Corralation between Xtra Energy and USCorp

Given the investment horizon of 90 days Xtra Energy Corp is expected to under-perform the USCorp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Xtra Energy Corp is 15.58 times less risky than USCorp. The pink sheet trades about -0.06 of its potential returns per unit of risk. The USCorp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.01  in USCorp on December 21, 2024 and sell it today you would earn a total of  0.99  from holding USCorp or generate 9900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.16%
Values	Daily Returns

Xtra Energy Corp  vs.  USCorp

Xtra Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtra Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

USCorp

Risk-Adjusted Performance

OK

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

Pair Trading with Xtra Energy and USCorp

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

The idea behind Xtra Energy Corp and USCorp 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.