Correlation Between XS Financial and Regional Management

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

By analyzing existing cross correlation between XS Financial and Regional Management Corp, you can compare the effects of market volatilities on XS Financial and Regional Management 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 Regional Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of XS Financial and Regional Management.

Diversification Opportunities for XS Financial and Regional Management

-0.27

Correlation Coefficient

XS Financial  Regional Management

Very good diversification

The 3 months correlation between XSHLF and Regional is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding XS Financial and Regional Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Management Corp 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 Regional Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Management Corp has no effect on the direction of XS Financial i.e., XS Financial and Regional Management go up and down completely randomly.

Pair Corralation between XS Financial and Regional Management

Assuming the 90 days horizon XS Financial is expected to under-perform the Regional Management. In addition to that, XS Financial is 5.08 times more volatile than Regional Management Corp. It trades about -0.02 of its total potential returns per unit of risk. Regional Management Corp is currently generating about 0.26 per unit of volatility. If you would invest  2,290  in Regional Management Corp on February 15, 2024 and sell it today you would earn a total of  713.00  from holding Regional Management Corp or generate 31.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

XS Financial  vs.  Regional Management Corp

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.

Regional Management Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Management Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Regional Management displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XS Financial and Regional Management

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

The idea behind XS Financial and Regional Management Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.