Correlation Between Sabre Corp and Xunlei

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Can any of the company-specific risk be diversified away by investing in both Sabre Corp and Xunlei 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 Sabre Corp and Xunlei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sabre Corp and Xunlei Limited, you can compare the effects of market volatilities on Sabre Corp and Xunlei 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 Sabre Corp with a short position of Xunlei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sabre Corp and Xunlei.

Diversification Opportunities for Sabre Corp and Xunlei

-0.39
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sabre and Xunlei is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Corp and Xunlei Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Limited and Sabre Corp 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 Sabre Corp are associated (or correlated) with Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Limited has no effect on the direction of Sabre Corp i.e., Sabre Corp and Xunlei go up and down completely randomly.

Pair Corralation between Sabre Corp and Xunlei

Given the investment horizon of 90 days Sabre Corp is expected to generate 1.01 times more return on investment than Xunlei. However, Sabre Corp is 1.01 times more volatile than Xunlei Limited. It trades about -0.01 of its potential returns per unit of risk. Xunlei Limited is currently generating about -0.04 per unit of risk. If you would invest  1,080  in Sabre Corp on May 10, 2022 and sell it today you would lose (331.00)  from holding Sabre Corp or give up 30.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sabre Corp  vs.  Xunlei Limited

 Performance (%) 
       Timeline  
Sabre Corp 
Sabre Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sabre Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Sabre Corp may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Sabre Price Channel

Xunlei Limited 
Xunlei Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, Xunlei unveiled solid returns over the last few months and may actually be approaching a breakup point.

Xunlei Price Channel

Sabre Corp and Xunlei Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sabre Corp and Xunlei

The main advantage of trading using opposite Sabre Corp and Xunlei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Corp position performs unexpectedly, Xunlei 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 Xunlei will offset losses from the drop in Xunlei's long position.
The idea behind Sabre Corp and Xunlei 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.
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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