Correlation Between Fidelity National and Xero

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

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

Diversification Opportunities for Fidelity National and Xero

0.01

Correlation Coefficient

Fidelity National  Xero

Significant diversification

The 3 months correlation between Fidelity and Xero is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Information and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and Fidelity National 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 Fidelity National Information are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of Fidelity National i.e., Fidelity National and Xero go up and down completely randomly.

Pair Corralation between Fidelity National and Xero

Assuming the 90 days trading horizon Fidelity National is expected to generate 3.04 times less return on investment than Xero. But when comparing it to its historical volatility, Fidelity National Information is 1.48 times less risky than Xero. It trades about 0.04 of its potential returns per unit of risk. Xero is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,740  in Xero on October 9, 2024 and sell it today you would earn a total of  5,460  from holding Xero or generate 115.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Fidelity National Information  vs.  Xero

Fidelity National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity National Information has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fidelity National is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Xero

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Fidelity National and Xero

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

The idea behind Fidelity National Information and Xero 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.