Correlation Between CEA Industries and Xos

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

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

Diversification Opportunities for CEA Industries and Xos

-0.31

Correlation Coefficient

CEA Industries  Xos

Very good diversification

The 3 months correlation between CEA and Xos is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding CEA Industries Warrant and Xos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Inc and CEA Industries 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 CEA Industries Warrant are associated (or correlated) with Xos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Inc has no effect on the direction of CEA Industries i.e., CEA Industries and Xos go up and down completely randomly.

Pair Corralation between CEA Industries and Xos

Assuming the 90 days horizon CEA Industries Warrant is expected to generate 19.77 times more return on investment than Xos. However, CEA Industries is 19.77 times more volatile than Xos Inc. It trades about 0.29 of its potential returns per unit of risk. Xos Inc is currently generating about -0.1 per unit of risk. If you would invest  0.61  in CEA Industries Warrant on September 15, 2024 and sell it today you would earn a total of  2.39  from holding CEA Industries Warrant or generate 391.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.06%
Values	Daily Returns

CEA Industries Warrant  vs.  Xos Inc

CEA Industries Warrant

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CEA Industries Warrant are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, CEA Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Xos Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xos Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CEA Industries and Xos

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

The idea behind CEA Industries Warrant and Xos 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 the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.