Correlation Between Seven West and XAAR PLC
Can any of the company-specific risk be diversified away by investing in both Seven West and XAAR PLC 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 Seven West and XAAR PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Seven West Media and XAAR PLC LS 10, you can compare the effects of market volatilities on Seven West and XAAR PLC 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 Seven West with a short position of XAAR PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seven West and XAAR PLC.
Diversification Opportunities for Seven West and XAAR PLC
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Seven and XAAR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and XAAR PLC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAAR PLC LS and Seven West 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 Seven West Media are associated (or correlated) with XAAR PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAAR PLC LS has no effect on the direction of Seven West i.e., Seven West and XAAR PLC go up and down completely randomly.
Pair Corralation between Seven West and XAAR PLC
Assuming the 90 days horizon Seven West Media is expected to generate 1.61 times more return on investment than XAAR PLC. However, Seven West is 1.61 times more volatile than XAAR PLC LS 10. It trades about -0.03 of its potential returns per unit of risk. XAAR PLC LS 10 is currently generating about -0.09 per unit of risk. If you would invest 12.00 in Seven West Media on September 3, 2024 and sell it today you would lose (3.70) from holding Seven West Media or give up 30.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Seven West Media vs. XAAR PLC LS 10
Performance |
| Timeline |
| Seven West Media |
| XAAR PLC LS |
Seven West and XAAR PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Seven West and XAAR PLC
The main advantage of trading using opposite Seven West and XAAR PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven West position performs unexpectedly, XAAR PLC 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 XAAR PLC will offset losses from the drop in XAAR PLC's long position.| Seven West vs. LION ONE METALS | Seven West vs. Aluminum of | Seven West vs. Ming Le Sports | Seven West vs. G III Apparel Group |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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