Correlation Between XS Financial and Consumer Portfolio

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

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

Diversification Opportunities for XS Financial and Consumer Portfolio

0.09

Correlation Coefficient

XS Financial  Consumer Portfolio

Significant diversification

The 3 months correlation between XSHLF and Consumer is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding XS Financial and Consumer Portfolio Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Portfolio and XS Financial 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 XS Financial are associated (or correlated) with Consumer Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Portfolio has no effect on the direction of XS Financial i.e., XS Financial and Consumer Portfolio go up and down completely randomly.

Pair Corralation between XS Financial and Consumer Portfolio

Assuming the 90 days horizon XS Financial is expected to generate 5.92 times more return on investment than Consumer Portfolio. However, XS Financial is 5.92 times more volatile than Consumer Portfolio Services. It trades about 0.0 of its potential returns per unit of risk. Consumer Portfolio Services is currently generating about -0.16 per unit of risk. If you would invest  3.40  in XS Financial on February 15, 2024 and sell it today you would lose (0.72) from holding XS Financial or give up 21.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

XS Financial  vs.  Consumer Portfolio Services

XS Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Consumer Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumer Portfolio Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with XS Financial and Consumer Portfolio

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

The idea behind XS Financial and Consumer Portfolio Services 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.