Correlation Between Waves and XYO

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

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

Diversification Opportunities for Waves and XYO

0.82

Correlation Coefficient

Waves  XYO

Very poor diversification

The 3 months correlation between Waves and XYO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Waves and XYO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XYO and Waves 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 Waves are associated (or correlated) with XYO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XYO has no effect on the direction of Waves i.e., Waves and XYO go up and down completely randomly.

Pair Corralation between Waves and XYO

Assuming the 90 days trading horizon Waves is expected to generate 1.07 times less return on investment than XYO. But when comparing it to its historical volatility, Waves is 2.08 times less risky than XYO. It trades about 0.26 of its potential returns per unit of risk. XYO is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.45  in XYO on September 2, 2024 and sell it today you would earn a total of  0.42  from holding XYO or generate 93.76% return on investment over 90 days.

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

Waves  vs.  XYO

Waves

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Waves are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Waves exhibited solid returns over the last few months and may actually be approaching a breakup point.

XYO

Risk-Adjusted Performance

10 of 100

Good

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

Pair Trading with Waves and XYO

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

The idea behind Waves and XYO 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.