Correlation Between COMMERCIAL VEHICLE and X FAB
Can any of the company-specific risk be diversified away by investing in both COMMERCIAL VEHICLE and X FAB 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 COMMERCIAL VEHICLE and X FAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between COMMERCIAL VEHICLE and X FAB Silicon Foundries, you can compare the effects of market volatilities on COMMERCIAL VEHICLE and X FAB 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 COMMERCIAL VEHICLE with a short position of X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL VEHICLE and X FAB.
Diversification Opportunities for COMMERCIAL VEHICLE and X FAB
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between COMMERCIAL and XFB is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL VEHICLE and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE are associated (or correlated) with X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of COMMERCIAL VEHICLE i.e., COMMERCIAL VEHICLE and X FAB go up and down completely randomly.
Pair Corralation between COMMERCIAL VEHICLE and X FAB
Assuming the 90 days trading horizon COMMERCIAL VEHICLE is expected to under-perform the X FAB. In addition to that, COMMERCIAL VEHICLE is 1.34 times more volatile than X FAB Silicon Foundries. It trades about -0.05 of its total potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.02 per unit of volatility. If you would invest 676.00 in X FAB Silicon Foundries on September 3, 2024 and sell it today you would lose (226.00) from holding X FAB Silicon Foundries or give up 33.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
COMMERCIAL VEHICLE vs. X FAB Silicon Foundries
Performance |
| Timeline |
| COMMERCIAL VEHICLE |
| X FAB Silicon |
COMMERCIAL VEHICLE and X FAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with COMMERCIAL VEHICLE and X FAB
The main advantage of trading using opposite COMMERCIAL VEHICLE and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COMMERCIAL VEHICLE position performs unexpectedly, X FAB 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 X FAB will offset losses from the drop in X FAB's long position.| COMMERCIAL VEHICLE vs. JD SPORTS FASH | COMMERCIAL VEHICLE vs. ARISTOCRAT LEISURE | COMMERCIAL VEHICLE vs. United Utilities Group | COMMERCIAL VEHICLE vs. Columbia Sportswear |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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