Correlation Between IDEX and Xometry
Can any of the company-specific risk be diversified away by investing in both IDEX and Xometry 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 IDEX and Xometry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IDEX Corporation and Xometry, you can compare the effects of market volatilities on IDEX and Xometry 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 IDEX with a short position of Xometry. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDEX and Xometry.
Diversification Opportunities for IDEX and Xometry
Very poor diversification
The 3 months correlation between IDEX and Xometry is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding IDEX Corp. and Xometry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xometry and IDEX 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 IDEX Corporation are associated (or correlated) with Xometry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xometry has no effect on the direction of IDEX i.e., IDEX and Xometry go up and down completely randomly.
Pair Corralation between IDEX and Xometry
Considering the 90-day investment horizon IDEX is expected to generate 8.7 times less return on investment than Xometry. But when comparing it to its historical volatility, IDEX Corporation is 4.07 times less risky than Xometry. It trades about 0.01 of its potential returns per unit of risk. Xometry is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,995 in Xometry on August 30, 2024 and sell it today you would lose (895.00) from holding Xometry or give up 22.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
IDEX Corp. vs. Xometry
Performance |
| Timeline |
| IDEX |
| Xometry |
IDEX and Xometry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IDEX and Xometry
The main advantage of trading using opposite IDEX and Xometry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDEX position performs unexpectedly, Xometry 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 Xometry will offset losses from the drop in Xometry's long position.The idea behind IDEX Corporation and Xometry 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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