Correlation Between XP Power and Volaris

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

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

Diversification Opportunities for XP Power and Volaris

0.46

Correlation Coefficient

XP Power  Volaris

Very weak diversification

The 3 months correlation between XPPLF and Volaris is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding XP Power Limited and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris and XP Power 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 XP Power Limited are associated (or correlated) with Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of XP Power i.e., XP Power and Volaris go up and down completely randomly.

Pair Corralation between XP Power and Volaris

Assuming the 90 days horizon XP Power is expected to generate 1.2 times less return on investment than Volaris. In addition to that, XP Power is 1.32 times more volatile than Volaris. It trades about 0.09 of its total potential returns per unit of risk. Volaris is currently generating about 0.14 per unit of volatility. If you would invest  455.00  in Volaris on May 25, 2025 and sell it today you would earn a total of  132.00  from holding Volaris or generate 29.01% return on investment over 90 days.

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

XP Power Limited  vs.  Volaris

XP Power Limited

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in XP Power Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, XP Power reported solid returns over the last few months and may actually be approaching a breakup point.

Volaris

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XP Power and Volaris

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

The idea behind XP Power Limited and Volaris 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.