Correlation Between Lilium Equity and Xos Equity

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

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

Diversification Opportunities for Lilium Equity and Xos Equity

0.77

Correlation Coefficient

Lilium Equity  Xos Equity

Poor diversification

The 3 months correlation between Lilium and Xos is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Lilium Equity Warrants and Xos Equity Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xos Equity Warrants and Lilium Equity 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 Lilium Equity Warrants are associated (or correlated) with Xos Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xos Equity Warrants has no effect on the direction of Lilium Equity i.e., Lilium Equity and Xos Equity go up and down completely randomly.

Pair Corralation between Lilium Equity and Xos Equity

Assuming the 90 days horizon Lilium Equity Warrants is expected to under-perform the Xos Equity. In addition to that, Lilium Equity is 1.28 times more volatile than Xos Equity Warrants. It trades about -0.15 of its total potential returns per unit of risk. Xos Equity Warrants is currently generating about -0.08 per unit of volatility. If you would invest  2.21  in Xos Equity Warrants on August 31, 2024 and sell it today you would lose (1.63) from holding Xos Equity Warrants or give up 73.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	88.89%
Values	Daily Returns

Lilium Equity Warrants  vs.  Xos Equity Warrants

Lilium Equity Warrants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lilium Equity Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Xos Equity Warrants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xos Equity Warrants has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Lilium Equity and Xos Equity

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

The idea behind Lilium Equity Warrants and Xos Equity Warrants 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.