Correlation Between Gartner and Xerox Corp

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

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

Diversification Opportunities for Gartner and Xerox Corp

-0.41

Correlation Coefficient

Gartner  Xerox Corp

Very good diversification

The 3 months correlation between Gartner and Xerox is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Gartner and Xerox Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xerox Corp and Gartner 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 Gartner are associated (or correlated) with Xerox Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xerox Corp has no effect on the direction of Gartner i.e., Gartner and Xerox Corp go up and down completely randomly.

Pair Corralation between Gartner and Xerox Corp

Allowing for the 90-day total investment horizon Gartner is expected to generate 20.38 times less return on investment than Xerox Corp. But when comparing it to its historical volatility, Gartner is 1.48 times less risky than Xerox Corp. It trades about 0.01 of its potential returns per unit of risk. Xerox Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  823.00  in Xerox Corp on August 31, 2024 and sell it today you would earn a total of  83.00  from holding Xerox Corp or generate 10.09% return on investment over 90 days.

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

Gartner  vs.  Xerox Corp

Gartner

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gartner are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gartner may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Xerox Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xerox Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gartner and Xerox Corp

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

The idea behind Gartner and Xerox 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.

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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.