Correlation Between Xp and Victory Capital

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

By analyzing existing cross correlation between Xp Inc and Victory Capital Holdings, you can compare the effects of market volatilities on Xp and Victory Capital 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 Victory Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xp and Victory Capital.

Diversification Opportunities for Xp and Victory Capital

-0.64

Correlation Coefficient

Xp  Victory Capital

Excellent diversification

The 3 months correlation between Xp and Victory is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Xp Inc and Victory Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Capital Holdings 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 Victory Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Capital Holdings has no effect on the direction of Xp i.e., Xp and Victory Capital go up and down completely randomly.

Pair Corralation between Xp and Victory Capital

Allowing for the 90-day total investment horizon Xp Inc is expected to under-perform the Victory Capital. In addition to that, Xp is 1.2 times more volatile than Victory Capital Holdings. It trades about -0.22 of its total potential returns per unit of risk. Victory Capital Holdings is currently generating about -0.09 per unit of volatility. If you would invest  6,903  in Victory Capital Holdings on September 30, 2024 and sell it today you would lose (277.00) from holding Victory Capital Holdings or give up 4.01% of portfolio value over 90 days.

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

Xp Inc  vs.  Victory Capital Holdings

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 abnormal 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.

Victory Capital Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Capital Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Victory Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xp and Victory Capital

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

The idea behind Xp Inc and Victory Capital Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.