Correlation Between 0x and SXP
Can any of the company-specific risk be diversified away by investing in both 0x 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 0x and SXP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 0x and SXP, you can compare the effects of market volatilities on 0x 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 0x with a short position of SXP. Check out your portfolio center. Please also check ongoing floating volatility patterns of 0x and SXP.
Diversification Opportunities for 0x and SXP
Poor diversification
The 3 months correlation between 0x and SXP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding 0x and SXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SXP and 0x 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 0x 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 0x i.e., 0x and SXP go up and down completely randomly.
Pair Corralation between 0x and SXP
Assuming the 90 days trading horizon 0x is expected to under-perform the SXP. In addition to that, 0x is 1.09 times more volatile than SXP. It trades about -0.41 of its total potential returns per unit of risk. SXP is currently generating about -0.16 per unit of volatility. If you would invest 48.00 in SXP on January 26, 2024 and sell it today you would lose (12.00) from holding SXP or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
0x vs. SXP
Performance |
| Timeline |
| 0x |
| SXP |
0x and SXP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 0x and SXP
The main advantage of trading using opposite 0x and SXP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 0x 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 0x 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| 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 | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |