Correlation Between TOPC and XNK

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Can any of the company-specific risk be diversified away by investing in both TOPC and XNK 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 TOPC and XNK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TOPC and XNK, you can compare the effects of market volatilities on TOPC and XNK 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 TOPC with a short position of XNK. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOPC and XNK.

Diversification Opportunities for TOPC and XNK

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between TOPC and XNK is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TOPC and XNK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XNK and TOPC 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 TOPC are associated (or correlated) with XNK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XNK has no effect on the direction of TOPC i.e., TOPC and XNK go up and down completely randomly.

Pair Corralation between TOPC and XNK

Assuming the 90 days trading horizon TOPC is expected to generate 11.87 times more return on investment than XNK. However, TOPC is 11.87 times more volatile than XNK. It trades about 0.06 of its potential returns per unit of risk. XNK is currently generating about -0.02 per unit of risk. If you would invest  0.08  in TOPC on December 30, 2023 and sell it today you would lose (0.08) from holding TOPC or give up 97.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy74.46%
ValuesDaily Returns

TOPC  vs.  XNK

 Performance 
       Timeline  
TOPC 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days TOPC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TOPC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
XNK 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days XNK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, XNK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

TOPC and XNK Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TOPC and XNK

The main advantage of trading using opposite TOPC and XNK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOPC position performs unexpectedly, XNK 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 XNK will offset losses from the drop in XNK's long position.
The idea behind TOPC and XNK 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.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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