Correlation Between Fast Retailing and X-FAB Silicon
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and X-FAB Silicon 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 Fast Retailing and X-FAB Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and X FAB Silicon Foundries, you can compare the effects of market volatilities on Fast Retailing and X-FAB Silicon 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 Fast Retailing with a short position of X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and X-FAB Silicon.
Diversification Opportunities for Fast Retailing and X-FAB Silicon
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fast and X-FAB is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co 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 Fast Retailing 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 Fast Retailing Co are associated (or correlated) with X-FAB Silicon. 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 Fast Retailing i.e., Fast Retailing and X-FAB Silicon go up and down completely randomly.
Pair Corralation between Fast Retailing and X-FAB Silicon
Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the X-FAB Silicon. But the stock apears to be less risky and, when comparing its historical volatility, Fast Retailing Co is 1.05 times less risky than X-FAB Silicon. The stock trades about -0.17 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 501.00 in X FAB Silicon Foundries on October 10, 2024 and sell it today you would lose (1.00) from holding X FAB Silicon Foundries or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. X FAB Silicon Foundries
Performance |
| Timeline |
| Fast Retailing |
| X FAB Silicon |
Fast Retailing and X-FAB Silicon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and X-FAB Silicon
The main advantage of trading using opposite Fast Retailing and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, X-FAB Silicon 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 Silicon will offset losses from the drop in X-FAB Silicon's long position.| Fast Retailing vs. Cardinal Health | Fast Retailing vs. AIR PRODCHEMICALS | Fast Retailing vs. Wenzhou Kangning Hospital | Fast Retailing vs. INSURANCE AUST GRP |
| X-FAB Silicon vs. Apple Inc | X-FAB Silicon vs. Apple Inc | X-FAB Silicon vs. Apple Inc | X-FAB Silicon vs. Apple Inc |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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