Correlation Between Xtra Energy and New Generation
Can any of the company-specific risk be diversified away by investing in both Xtra Energy and New Generation 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 Xtra Energy and New Generation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xtra Energy Corp and New Generation Consumer, you can compare the effects of market volatilities on Xtra Energy and New Generation 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 Xtra Energy with a short position of New Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtra Energy and New Generation.
Diversification Opportunities for Xtra Energy and New Generation
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Xtra and New is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Xtra Energy Corp and New Generation Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Generation Consumer and Xtra Energy 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 Xtra Energy Corp are associated (or correlated) with New Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Generation Consumer has no effect on the direction of Xtra Energy i.e., Xtra Energy and New Generation go up and down completely randomly.
Pair Corralation between Xtra Energy and New Generation
Given the investment horizon of 90 days Xtra Energy Corp is expected to generate 0.57 times more return on investment than New Generation. However, Xtra Energy Corp is 1.76 times less risky than New Generation. It trades about 0.16 of its potential returns per unit of risk. New Generation Consumer is currently generating about -0.11 per unit of risk. If you would invest 13.00 in Xtra Energy Corp on August 26, 2024 and sell it today you would earn a total of 3.00 from holding Xtra Energy Corp or generate 23.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xtra Energy Corp vs. New Generation Consumer
Performance |
| Timeline |
| Xtra Energy Corp |
| New Generation Consumer |
Xtra Energy and New Generation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xtra Energy and New Generation
The main advantage of trading using opposite Xtra Energy and New Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtra Energy position performs unexpectedly, New Generation 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 New Generation will offset losses from the drop in New Generation's long position.| Xtra Energy vs. XCana Petroleum | Xtra Energy vs. New Generation Consumer | Xtra Energy vs. Arsenal Digital Holdings | Xtra Energy vs. UHF Logistics Group |
| New Generation vs. Xtra Energy Corp | New Generation vs. Arsenal Digital Holdings | New Generation vs. UHF Logistics Group | New Generation vs. XCana Petroleum |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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