Correlation Between Xplora Technologies and Techstep ASA

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

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

Diversification Opportunities for Xplora Technologies and Techstep ASA

0.29

Correlation Coefficient

Xplora Technologies  Techstep ASA

Modest diversification

The 3 months correlation between Xplora and Techstep is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Xplora Technologies As and Techstep ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techstep ASA and Xplora Technologies 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 Xplora Technologies As are associated (or correlated) with Techstep ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techstep ASA has no effect on the direction of Xplora Technologies i.e., Xplora Technologies and Techstep ASA go up and down completely randomly.

Pair Corralation between Xplora Technologies and Techstep ASA

Assuming the 90 days trading horizon Xplora Technologies As is expected to generate 0.99 times more return on investment than Techstep ASA. However, Xplora Technologies As is 1.01 times less risky than Techstep ASA. It trades about 0.33 of its potential returns per unit of risk. Techstep ASA is currently generating about 0.03 per unit of risk. If you would invest  1,725  in Xplora Technologies As on September 13, 2024 and sell it today you would earn a total of  1,505  from holding Xplora Technologies As or generate 87.25% return on investment over 90 days.

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

Xplora Technologies As  vs.  Techstep ASA

Xplora Technologies

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Xplora Technologies As are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Xplora Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Techstep ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Techstep ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Techstep ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xplora Technologies and Techstep ASA

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

The idea behind Xplora Technologies As and Techstep ASA 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .