Correlation Between Xpeng and Vicinity

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

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

Diversification Opportunities for Xpeng and Vicinity

0.41

Correlation Coefficient

Xpeng  Vicinity

Very weak diversification

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

Pair Corralation between Xpeng and Vicinity

Given the investment horizon of 90 days Xpeng Inc is expected to under-perform the Vicinity. But the stock apears to be less risky and, when comparing its historical volatility, Xpeng Inc is 1.12 times less risky than Vicinity. The stock trades about -0.13 of its potential returns per unit of risk. The Vicinity Motor Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  85.00  in Vicinity Motor Corp on January 31, 2024 and sell it today you would lose (13.00) from holding Vicinity Motor Corp or give up 15.29% of portfolio value over 90 days.

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

Xpeng Inc  vs.  Vicinity Motor Corp

Xpeng Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xpeng Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Xpeng is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Vicinity Motor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vicinity Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Xpeng and Vicinity

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

The idea behind Xpeng Inc and Vicinity Motor 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.