Correlation Between USD Coin and SXP

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Can any of the company-specific risk be diversified away by investing in both USD Coin and SXP 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 USD Coin and SXP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between USD Coin and SXP, you can compare the effects of market volatilities on USD Coin and SXP 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 USD Coin with a short position of SXP. Check out your portfolio center. Please also check ongoing floating volatility patterns of USD Coin and SXP.

Diversification Opportunities for USD Coin and SXP

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between USD and SXP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding USD Coin and SXP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SXP and USD Coin 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 USD Coin are associated (or correlated) with SXP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SXP has no effect on the direction of USD Coin i.e., USD Coin and SXP go up and down completely randomly.

Pair Corralation between USD Coin and SXP

Assuming the 90 days trading horizon USD Coin is expected to generate 1423.0 times less return on investment than SXP. But when comparing it to its historical volatility, USD Coin is 28.52 times less risky than SXP. It trades about 0.0 of its potential returns per unit of risk. SXP is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  28.00  in SXP on December 29, 2023 and sell it today you would earn a total of  20.00  from holding SXP or generate 71.43% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

USD Coin  vs.  SXP

 Performance 
       Timeline  
USD Coin 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days USD Coin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, USD Coin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
SXP 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in SXP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SXP exhibited solid returns over the last few months and may actually be approaching a breakup point.

USD Coin and SXP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with USD Coin and SXP

The main advantage of trading using opposite USD Coin and SXP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USD Coin position performs unexpectedly, SXP 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 SXP will offset losses from the drop in SXP's long position.
The idea behind USD Coin and SXP 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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