Correlation Between G8 Education and Xero
Can any of the company-specific risk be diversified away by investing in both G8 Education 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 G8 Education and Xero into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between G8 Education and Xero, you can compare the effects of market volatilities on G8 Education 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 G8 Education with a short position of Xero. Check out your portfolio center. Please also check ongoing floating volatility patterns of G8 Education and Xero.
Diversification Opportunities for G8 Education and Xero
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GEM and Xero is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding G8 Education and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and G8 Education 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 G8 Education 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 G8 Education i.e., G8 Education and Xero go up and down completely randomly.
Pair Corralation between G8 Education and Xero
Assuming the 90 days trading horizon G8 Education is expected to generate 2.25 times less return on investment than Xero. In addition to that, G8 Education is 1.06 times more volatile than Xero. It trades about 0.07 of its total potential returns per unit of risk. Xero is currently generating about 0.18 per unit of volatility. If you would invest 12,593 in Xero on September 3, 2024 and sell it today you would earn a total of 4,792 from holding Xero or generate 38.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
G8 Education vs. Xero
Performance |
| Timeline |
| G8 Education |
| Xero |
G8 Education and Xero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with G8 Education and Xero
The main advantage of trading using opposite G8 Education and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G8 Education 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.| G8 Education vs. Westpac Banking | G8 Education vs. Champion Iron | G8 Education vs. iShares Global Healthcare | G8 Education vs. Peel Mining |
| Xero vs. COAST ENTERTAINMENT HOLDINGS | Xero vs. oOhMedia | Xero vs. Flagship Investments | Xero vs. Centaurus Metals |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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