Correlation Between V and XTM
Can any of the company-specific risk be diversified away by investing in both V and XTM 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 V and XTM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between V Group and XTM Inc, you can compare the effects of market volatilities on V and XTM 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 V with a short position of XTM. Check out your portfolio center. Please also check ongoing floating volatility patterns of V and XTM.
Diversification Opportunities for V and XTM
Pay attention - limited upside
The 3 months correlation between V and XTM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding V Group and XTM Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTM Inc and V 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 V Group are associated (or correlated) with XTM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTM Inc has no effect on the direction of V i.e., V and XTM go up and down completely randomly.
Pair Corralation between V and XTM
If you would invest 7.75 in XTM Inc on August 27, 2024 and sell it today you would lose (0.75) from holding XTM Inc or give up 9.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
V Group vs. XTM Inc
Performance |
| Timeline |
| V Group |
| XTM Inc |
V and XTM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with V and XTM
The main advantage of trading using opposite V and XTM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V position performs unexpectedly, XTM 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 XTM will offset losses from the drop in XTM's long position.The idea behind V Group and XTM Inc 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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