Correlation Between Xp and Scully Royalty

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

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

Diversification Opportunities for Xp and Scully Royalty

0.67

Correlation Coefficient

Xp  Scully Royalty

Poor diversification

The 3 months correlation between Xp and Scully is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Scully Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scully Royalty and Xp 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 Xp Inc are associated (or correlated) with Scully Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scully Royalty has no effect on the direction of Xp i.e., Xp and Scully Royalty go up and down completely randomly.

Pair Corralation between Xp and Scully Royalty

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the Scully Royalty. In addition to that, Xp is 1.23 times more volatile than Scully Royalty. It trades about -0.36 of its total potential returns per unit of risk. Scully Royalty is currently generating about -0.19 per unit of volatility. If you would invest  779.00  in Scully Royalty on September 15, 2024 and sell it today you would lose (80.00) from holding Scully Royalty or give up 10.27% of portfolio value over 90 days.

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

Xp Inc  vs.  Scully Royalty

Xp Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xp Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Scully Royalty

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scully Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Xp and Scully Royalty

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

The idea behind Xp Inc and Scully Royalty 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.