Correlation Between Xtract One and Converge Technology

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

By analyzing existing cross correlation between Xtract One Technologies and Converge Technology Solutions, you can compare the effects of market volatilities on Xtract One and Converge Technology 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 Xtract One with a short position of Converge Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtract One and Converge Technology.

Diversification Opportunities for Xtract One and Converge Technology

-0.68

Correlation Coefficient

Xtract One  Converge Technology

Excellent diversification

The 3 months correlation between Xtract and Converge is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Xtract One Technologies and Converge Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Converge Technology and Xtract One 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 Xtract One Technologies are associated (or correlated) with Converge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Converge Technology has no effect on the direction of Xtract One i.e., Xtract One and Converge Technology go up and down completely randomly.

Pair Corralation between Xtract One and Converge Technology

Assuming the 90 days trading horizon Xtract One Technologies is expected to under-perform the Converge Technology. But the stock apears to be less risky and, when comparing its historical volatility, Xtract One Technologies is 1.68 times less risky than Converge Technology. The stock trades about -0.06 of its potential returns per unit of risk. The Converge Technology Solutions is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  323.00  in Converge Technology Solutions on December 30, 2024 and sell it today you would earn a total of  223.00  from holding Converge Technology Solutions or generate 69.04% return on investment over 90 days.

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

Xtract One Technologies  vs.  Converge Technology Solutions

Xtract One Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xtract One Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Converge Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Converge Technology Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Converge Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtract One and Converge Technology

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

The idea behind Xtract One Technologies and Converge Technology Solutions 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.