Correlation Between Autosports and Xero
Can any of the company-specific risk be diversified away by investing in both Autosports 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 Autosports and Xero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Autosports Group and Xero, you can compare the effects of market volatilities on Autosports 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 Autosports with a short position of Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Autosports and Xero.
Diversification Opportunities for Autosports and Xero
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Autosports and Xero is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Autosports Group and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and Autosports 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 Autosports Group 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 Autosports i.e., Autosports and Xero go up and down completely randomly.
Pair Corralation between Autosports and Xero
Assuming the 90 days trading horizon Autosports is expected to generate 7.07 times less return on investment than Xero. But when comparing it to its historical volatility, Autosports Group is 1.1 times less risky than Xero. It trades about 0.02 of its potential returns per unit of risk. Xero is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7,201 in Xero on August 31, 2024 and sell it today you would earn a total of 10,387 from holding Xero or generate 144.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Autosports Group vs. Xero
Performance |
| Timeline |
| Autosports Group |
| Xero |
Autosports and Xero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Autosports and Xero
The main advantage of trading using opposite Autosports and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Autosports 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.| Autosports vs. Aneka Tambang Tbk | Autosports vs. Unibail Rodamco Westfield SE | Autosports vs. Macquarie Group | Autosports vs. Commonwealth Bank |
| Xero vs. Patriot Battery Metals | Xero vs. Stelar Metals | Xero vs. Centuria Industrial Reit | Xero vs. IDP Education |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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