Correlation Between XIAO I and Dave

Can any of the company-specific risk be diversified away by investing in both XIAO I and Dave 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 XIAO I and Dave into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between XIAO I American and Dave Inc, you can compare the effects of market volatilities on XIAO I and Dave 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 XIAO I with a short position of Dave. Check out your portfolio center. Please also check ongoing floating volatility patterns of XIAO I and Dave.

Diversification Opportunities for XIAO I and Dave

0.34

Correlation Coefficient

XIAO I Dave

Weak diversification

The 3 months correlation between XIAO and Dave is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding XIAO-I American and Dave Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Inc and XIAO I 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 XIAO I American are associated (or correlated) with Dave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Inc has no effect on the direction of XIAO I i.e., XIAO I and Dave go up and down completely randomly.

Pair Corralation between XIAO I and Dave

Given the investment horizon of 90 days XIAO I American is expected to generate 0.99 times more return on investment than Dave. However, XIAO I American is 1.01 times less risky than Dave. It trades about 0.07 of its potential returns per unit of risk. Dave Inc is currently generating about -0.09 per unit of risk. If you would invest  581.00  in XIAO I American on March 3, 2023 and sell it today you would earn a total of  84.00  from holding XIAO I American or generate 14.46% return on investment over 90 days.

XIAO-I American  vs.  Dave Inc

XIAO-I American

XIAO Performance

5 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in XIAO I American are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, XIAO I demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Dave Inc

Dave Performance

0 of 100

Over the last 90 days Dave Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with XIAO I and Dave

The main advantage of trading using opposite XIAO I and Dave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XIAO I position performs unexpectedly, Dave 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 Dave will offset losses from the drop in Dave's long position.

The idea behind XIAO I American and Dave Inc 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.