Correlation Between Rich Development and XAC Automation

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

By analyzing existing cross correlation between Rich Development Co and XAC Automation, you can compare the effects of market volatilities on Rich Development and XAC Automation 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 Rich Development with a short position of XAC Automation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rich Development and XAC Automation.

Diversification Opportunities for Rich Development and XAC Automation

-0.24

Correlation Coefficient

Rich Development  XAC Automation

Very good diversification

The 3 months correlation between Rich and XAC is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rich Development Co and XAC Automation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XAC Automation and Rich Development 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 Rich Development Co are associated (or correlated) with XAC Automation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XAC Automation has no effect on the direction of Rich Development i.e., Rich Development and XAC Automation go up and down completely randomly.

Pair Corralation between Rich Development and XAC Automation

Assuming the 90 days trading horizon Rich Development Co is expected to under-perform the XAC Automation. But the stock apears to be less risky and, when comparing its historical volatility, Rich Development Co is 1.32 times less risky than XAC Automation. The stock trades about -0.12 of its potential returns per unit of risk. The XAC Automation is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,615  in XAC Automation on September 13, 2024 and sell it today you would lose (85.00) from holding XAC Automation or give up 3.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Rich Development Co  vs.  XAC Automation

Rich Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rich Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

XAC Automation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XAC Automation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, XAC Automation is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Rich Development and XAC Automation

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

The idea behind Rich Development Co and XAC Automation 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.