Correlation Between BSP Financial and Xero

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

Diversification Opportunities for BSP Financial and Xero

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between BSP and Xero is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding BSP Financial Group and Xero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero and BSP Financial 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 BSP Financial Group are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero has no effect on the direction of BSP Financial i.e., BSP Financial and Xero go up and down completely randomly.

Pair Corralation between BSP Financial and Xero

Assuming the 90 days trading horizon BSP Financial is expected to generate 3.9 times less return on investment than Xero. In addition to that, BSP Financial is 1.07 times more volatile than Xero. It trades about 0.04 of its total potential returns per unit of risk. Xero is currently generating about 0.19 per unit of volatility. If you would invest  14,210  in Xero on September 13, 2024 and sell it today you would earn a total of  2,652  from holding Xero or generate 18.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BSP Financial Group  vs.  Xero

 Performance 
       Timeline  
BSP Financial Group 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in BSP Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, BSP Financial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Xero 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Xero are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Xero unveiled solid returns over the last few months and may actually be approaching a breakup point.

BSP Financial and Xero Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BSP Financial and Xero

The main advantage of trading using opposite BSP Financial and Xero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BSP Financial position performs unexpectedly, Xero 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 Xero will offset losses from the drop in Xero's long position.
The idea behind BSP Financial Group and Xero 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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