Correlation Between Gap and Xtep International
Can any of the company-specific risk be diversified away by investing in both Gap and Xtep International 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 Gap and Xtep International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Gap and Xtep International Holdings, you can compare the effects of market volatilities on Gap and Xtep International 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 Gap with a short position of Xtep International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap and Xtep International.
Diversification Opportunities for Gap and Xtep International
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gap and Xtep is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding The Gap and Xtep International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtep International and Gap 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 The Gap are associated (or correlated) with Xtep International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtep International has no effect on the direction of Gap i.e., Gap and Xtep International go up and down completely randomly.
Pair Corralation between Gap and Xtep International
Assuming the 90 days horizon The Gap is expected to under-perform the Xtep International. But the stock apears to be less risky and, when comparing its historical volatility, The Gap is 1.26 times less risky than Xtep International. The stock trades about -0.09 of its potential returns per unit of risk. The Xtep International Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 71.00 in Xtep International Holdings on October 20, 2024 and sell it today you would lose (1.00) from holding Xtep International Holdings or give up 1.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Gap vs. Xtep International Holdings
Performance |
| Timeline |
| Gap |
| Xtep International |
Gap and Xtep International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gap and Xtep International
The main advantage of trading using opposite Gap and Xtep International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap position performs unexpectedly, Xtep International 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 Xtep International will offset losses from the drop in Xtep International's long position.| Gap vs. Industria de Diseno | Gap vs. The TJX Companies | Gap vs. Fast Retailing Co | Gap vs. Lululemon Athletica |
| Xtep International vs. Industria de Diseno | Xtep International vs. The TJX Companies | Xtep International vs. Fast Retailing Co | Xtep International vs. Lululemon Athletica |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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