Correlation Between Almacenes Xito and Transocean

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

By analyzing existing cross correlation between Almacenes xito SA and Transocean, you can compare the effects of market volatilities on Almacenes Xito and Transocean 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 Almacenes Xito with a short position of Transocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Almacenes Xito and Transocean.

Diversification Opportunities for Almacenes Xito and Transocean

0.29

Correlation Coefficient

Almacenes Xito  Transocean

Modest diversification

The 3 months correlation between Almacenes and Transocean is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Almacenes xito SA and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Almacenes Xito 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 Almacenes xito SA are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Almacenes Xito i.e., Almacenes Xito and Transocean go up and down completely randomly.

Pair Corralation between Almacenes Xito and Transocean

Given the investment horizon of 90 days Almacenes xito SA is expected to generate 0.73 times more return on investment than Transocean. However, Almacenes xito SA is 1.38 times less risky than Transocean. It trades about -0.06 of its potential returns per unit of risk. Transocean is currently generating about -0.08 per unit of risk. If you would invest  412.00  in Almacenes xito SA on September 26, 2024 and sell it today you would lose (38.00) from holding Almacenes xito SA or give up 9.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Almacenes xito SA  vs.  Transocean

Almacenes xito SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Almacenes xito SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Almacenes Xito and Transocean

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

The idea behind Almacenes xito SA and Transocean 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.