Correlation Between HE Equipment and Xponential Fitness

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

By analyzing existing cross correlation between HE Equipment Services and Xponential Fitness, you can compare the effects of market volatilities on HE Equipment and Xponential Fitness 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 HE Equipment with a short position of Xponential Fitness. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Xponential Fitness.

Diversification Opportunities for HE Equipment and Xponential Fitness

0.69

Correlation Coefficient

HE Equipment  Xponential Fitness

Poor diversification

The 3 months correlation between HEES and Xponential is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Xponential Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xponential Fitness and HE Equipment 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 HE Equipment Services are associated (or correlated) with Xponential Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xponential Fitness has no effect on the direction of HE Equipment i.e., HE Equipment and Xponential Fitness go up and down completely randomly.

Pair Corralation between HE Equipment and Xponential Fitness

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Xponential Fitness. But the stock apears to be less risky and, when comparing its historical volatility, HE Equipment Services is 1.68 times less risky than Xponential Fitness. The stock trades about -0.06 of its potential returns per unit of risk. The Xponential Fitness is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,541  in Xponential Fitness on September 17, 2024 and sell it today you would lose (28.00) from holding Xponential Fitness or give up 1.82% of portfolio value over 90 days.

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

HE Equipment Services  vs.  Xponential Fitness

HE Equipment Services

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xponential Fitness

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xponential Fitness are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Xponential Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HE Equipment and Xponential Fitness

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

The idea behind HE Equipment Services and Xponential Fitness 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.