Correlation Between True USD and SXP
Can any of the company-specific risk be diversified away by investing in both True USD and SXP 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 True USD and SXP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between True USD and SXP, you can compare the effects of market volatilities on True USD and SXP 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 True USD with a short position of SXP. Check out your portfolio center. Please also check ongoing floating volatility patterns of True USD and SXP.
Diversification Opportunities for True USD and SXP
Very weak diversification
The 3 months correlation between True and SXP is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding True USD and SXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SXP and True USD 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 True USD are associated (or correlated) with SXP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SXP has no effect on the direction of True USD i.e., True USD and SXP go up and down completely randomly.
Pair Corralation between True USD and SXP
Assuming the 90 days trading horizon True USD is expected to generate 706.83 times less return on investment than SXP. But when comparing it to its historical volatility, True USD is 12.04 times less risky than SXP. It trades about 0.0 of its potential returns per unit of risk. SXP is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 40.00 in SXP on December 30, 2023 and sell it today you would earn a total of 10.00 from holding SXP or generate 25.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
True USD vs. SXP
Performance |
Timeline |
True USD |
SXP |
True USD and SXP Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with True USD and SXP
The main advantage of trading using opposite True USD and SXP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if True USD position performs unexpectedly, SXP 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 SXP will offset losses from the drop in SXP's long position.The idea behind True USD and SXP 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
Other Complementary Tools
Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
Fundamental Analysis View fundamental data based on most recent published financial statements | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Stocks Directory Find actively traded stocks across global markets | |
My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
Commodity Directory Find actively traded commodities issued by global exchanges |