Correlation Between XDN and XWC

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

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

Diversification Opportunities for XDN and XWC

0.45

Correlation Coefficient

XDN  XWC

Very weak diversification

The 3 months correlation between XDN and XWC is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding XDN and XWC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWC 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 XWC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWC has no effect on the direction of XDN i.e., XDN and XWC go up and down completely randomly.

Pair Corralation between XDN and XWC

Assuming the 90 days trading horizon XDN is expected to under-perform the XWC. In addition to that, XDN is 3.66 times more volatile than XWC. It trades about -0.06 of its total potential returns per unit of risk. XWC is currently generating about 0.21 per unit of volatility. If you would invest  3.28  in XWC on April 22, 2025 and sell it today you would earn a total of  0.85  from holding XWC or generate 25.91% return on investment over 90 days.

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

XDN  vs.  XWC

XDN

Risk-Adjusted Performance

Very Weak

Over the last 90 days XDN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for XDN shareholders.

XWC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in XWC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, XWC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XDN and XWC

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

The idea behind XDN and XWC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.