Correlation Between XIAO I and DHI
Can any of the company-specific risk be diversified away by investing in both XIAO I and DHI 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 XIAO I and DHI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XIAO I American and DHI Group, you can compare the effects of market volatilities on XIAO I and DHI 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 XIAO I with a short position of DHI. Check out your portfolio center. Please also check ongoing floating volatility patterns of XIAO I and DHI.
Diversification Opportunities for XIAO I and DHI
Excellent diversification
The 3 months correlation between XIAO and DHI is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding XIAO I American and DHI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHI Group and XIAO I 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 XIAO I American are associated (or correlated) with DHI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHI Group has no effect on the direction of XIAO I i.e., XIAO I and DHI go up and down completely randomly.
Pair Corralation between XIAO I and DHI
Given the investment horizon of 90 days XIAO I American is expected to under-perform the DHI. In addition to that, XIAO I is 1.33 times more volatile than DHI Group. It trades about -0.18 of its total potential returns per unit of risk. DHI Group is currently generating about 0.64 per unit of volatility. If you would invest 175.00 in DHI Group on November 2, 2024 and sell it today you would earn a total of 121.00 from holding DHI Group or generate 69.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
XIAO I American vs. DHI Group
Performance |
| Timeline |
| XIAO I American |
| DHI Group |
XIAO I and DHI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XIAO I and DHI
The main advantage of trading using opposite XIAO I and DHI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XIAO I position performs unexpectedly, DHI 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 DHI will offset losses from the drop in DHI's long position.The idea behind XIAO I American and DHI Group 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.Check out your portfolio center.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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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