Correlation Between Xponential Fitness and Melbana Energy

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

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

Diversification Opportunities for Xponential Fitness and Melbana Energy

0.0

Correlation Coefficient

Xponential Fitness  Melbana Energy

Pay attention - limited upside

The 3 months correlation between Xponential and Melbana is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Xponential Fitness and Melbana Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melbana Energy and Xponential Fitness 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 Xponential Fitness are associated (or correlated) with Melbana Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melbana Energy has no effect on the direction of Xponential Fitness i.e., Xponential Fitness and Melbana Energy go up and down completely randomly.

Pair Corralation between Xponential Fitness and Melbana Energy

Given the investment horizon of 90 days Xponential Fitness is expected to generate 33.49 times less return on investment than Melbana Energy. But when comparing it to its historical volatility, Xponential Fitness is 8.98 times less risky than Melbana Energy. It trades about 0.01 of its potential returns per unit of risk. Melbana Energy Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2.80  in Melbana Energy Limited on September 4, 2024 and sell it today you would lose (0.80) from holding Melbana Energy Limited or give up 28.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Xponential Fitness  vs.  Melbana Energy Limited

Xponential Fitness

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xponential Fitness are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Xponential Fitness reported solid returns over the last few months and may actually be approaching a breakup point.

Melbana Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melbana Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Melbana Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xponential Fitness and Melbana Energy

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

The idea behind Xponential Fitness and Melbana Energy Limited 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.