Correlation Between XYO and Chia

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

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

Diversification Opportunities for XYO and Chia

0.73

Correlation Coefficient

XYO  Chia

Poor diversification

The 3 months correlation between XYO and Chia is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding XYO and Chia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chia and XYO 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 XYO are associated (or correlated) with Chia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chia has no effect on the direction of XYO i.e., XYO and Chia go up and down completely randomly.

Pair Corralation between XYO and Chia

Assuming the 90 days trading horizon XYO is expected to generate 1.79 times more return on investment than Chia. However, XYO is 1.79 times more volatile than Chia. It trades about 0.09 of its potential returns per unit of risk. Chia is currently generating about 0.04 per unit of risk. If you would invest  0.81  in XYO on September 3, 2024 and sell it today you would earn a total of  1.00  from holding XYO or generate 122.66% return on investment over 90 days.

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

XYO  vs.  Chia

XYO

Risk-Adjusted Performance

14 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XYO are ranked lower than 14 (%) 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.

Chia

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chia are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Chia exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XYO and Chia

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

The idea behind XYO and Chia 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.