Correlation Between Keyence and Xero

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

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

Diversification Opportunities for Keyence and Xero

-0.52

Correlation Coefficient

Keyence  Xero

Excellent diversification

The 3 months correlation between Keyence and Xero is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Keyence and Xero Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xero Limited and Keyence 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 Keyence are associated (or correlated) with Xero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xero Limited has no effect on the direction of Keyence i.e., Keyence and Xero go up and down completely randomly.

Pair Corralation between Keyence and Xero

Assuming the 90 days horizon Keyence is expected to generate 1.19 times more return on investment than Xero. However, Keyence is 1.19 times more volatile than Xero Limited. It trades about 0.08 of its potential returns per unit of risk. Xero Limited is currently generating about -0.13 per unit of risk. If you would invest  36,019  in Keyence on July 31, 2025 and sell it today you would earn a total of  4,031  from holding Keyence or generate 11.19% return on investment over 90 days.

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

Keyence  vs.  Xero Limited

Keyence

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Keyence are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Keyence may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Xero Limited

Risk-Adjusted Performance

Weakest

Over the last 90 days Xero Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in November 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Keyence and Xero

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

The idea behind Keyence and Xero Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.