Correlation Between XDN and CVNT

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

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

Diversification Opportunities for XDN and CVNT

0.46

Correlation Coefficient

XDN  CVNT

Very weak diversification

The 3 months correlation between XDN and CVNT is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding XDN and CVNT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVNT and XDN 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 XDN are associated (or correlated) with CVNT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVNT has no effect on the direction of XDN i.e., XDN and CVNT go up and down completely randomly.

Pair Corralation between XDN and CVNT

Assuming the 90 days trading horizon XDN is expected to generate 2.95 times more return on investment than CVNT. However, XDN is 2.95 times more volatile than CVNT. It trades about 0.05 of its potential returns per unit of risk. CVNT is currently generating about -0.08 per unit of risk. If you would invest  0.00  in XDN on January 30, 2024 and sell it today you would earn a total of  0.00  from holding XDN or generate 0.0% return on investment over 90 days.

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

XDN  vs.  CVNT

XDN

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XDN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, XDN exhibited solid returns over the last few months and may actually be approaching a breakup point.

CVNT

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVNT are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CVNT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XDN and CVNT

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

The idea behind XDN and CVNT 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.