Correlation Between Volaris and RXO

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

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

Diversification Opportunities for Volaris and RXO

0.76

Correlation Coefficient

Volaris  RXO

Poor diversification

The 3 months correlation between Volaris and RXO is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Volaris and RXO Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RXO Inc and Volaris 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 Volaris are associated (or correlated) with RXO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RXO Inc has no effect on the direction of Volaris i.e., Volaris and RXO go up and down completely randomly.

Pair Corralation between Volaris and RXO

Given the investment horizon of 90 days Volaris is expected to generate 0.82 times more return on investment than RXO. However, Volaris is 1.22 times less risky than RXO. It trades about -0.21 of its potential returns per unit of risk. RXO Inc is currently generating about -0.21 per unit of risk. If you would invest  785.00  in Volaris on January 7, 2025 and sell it today you would lose (298.00) from holding Volaris or give up 37.96% of portfolio value over 90 days.

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

Volaris  vs.  RXO Inc

Volaris

Risk-Adjusted Performance

Very Weak

Over the last 90 days Volaris has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

RXO Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days RXO Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Volaris and RXO

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

The idea behind Volaris and RXO Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.