Correlation Between Zip Co and XS Financial
Can any of the company-specific risk be diversified away by investing in both Zip Co and XS Financial 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 Zip Co and XS Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zip Co Limited and XS Financial, you can compare the effects of market volatilities on Zip Co and XS Financial 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 Zip Co with a short position of XS Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zip Co and XS Financial.
Diversification Opportunities for Zip Co and XS Financial
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Zip and XSHLF is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Zip Co Limited and XS Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XS Financial and Zip Co 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 Zip Co Limited are associated (or correlated) with XS Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XS Financial has no effect on the direction of Zip Co i.e., Zip Co and XS Financial go up and down completely randomly.
Pair Corralation between Zip Co and XS Financial
Assuming the 90 days horizon Zip Co is expected to generate 1.28 times less return on investment than XS Financial. But when comparing it to its historical volatility, Zip Co Limited is 1.78 times less risky than XS Financial. It trades about 0.07 of its potential returns per unit of risk. XS Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5.50 in XS Financial on August 27, 2024 and sell it today you would lose (1.61) from holding XS Financial or give up 29.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 92.14% |
| Values | Daily Returns |
Zip Co Limited vs. XS Financial
Performance |
| Timeline |
| Zip Co Limited |
| XS Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Zip Co and XS Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zip Co and XS Financial
The main advantage of trading using opposite Zip Co and XS Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zip Co position performs unexpectedly, XS Financial 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 XS Financial will offset losses from the drop in XS Financial's long position.| Zip Co vs. Cosmos Group Holdings | Zip Co vs. Regional Management Corp | Zip Co vs. Enova International | Zip Co vs. Open Lending Corp |
| XS Financial vs. Zip Co Limited | XS Financial vs. KYN Capital Group | XS Financial vs. CYIOS | XS Financial vs. Cosmos Group Holdings |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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