Correlation Between Keurig Dr and X-FAB Silicon
Can any of the company-specific risk be diversified away by investing in both Keurig Dr 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 Keurig Dr 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 Keurig Dr Pepper and X FAB Silicon Foundries, you can compare the effects of market volatilities on Keurig Dr 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 Keurig Dr with a short position of X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keurig Dr and X-FAB Silicon.
Diversification Opportunities for Keurig Dr and X-FAB Silicon
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Keurig and X-FAB is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper 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 Keurig Dr 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 Keurig Dr Pepper 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 Keurig Dr i.e., Keurig Dr and X-FAB Silicon go up and down completely randomly.
Pair Corralation between Keurig Dr and X-FAB Silicon
Considering the 90-day investment horizon Keurig Dr Pepper is expected to generate 0.49 times more return on investment than X-FAB Silicon. However, Keurig Dr Pepper is 2.05 times less risky than X-FAB Silicon. It trades about -0.19 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.3 per unit of risk. If you would invest 3,494 in Keurig Dr Pepper on August 25, 2024 and sell it today you would lose (228.00) from holding Keurig Dr Pepper or give up 6.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Keurig Dr Pepper vs. X FAB Silicon Foundries
Performance |
| Timeline |
| Keurig Dr Pepper |
| X FAB Silicon |
Keurig Dr and X-FAB Silicon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Keurig Dr and X-FAB Silicon
The main advantage of trading using opposite Keurig Dr and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr 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.The idea behind Keurig Dr Pepper and X FAB Silicon Foundries 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.| X-FAB Silicon vs. NVIDIA | X-FAB Silicon vs. Intel | X-FAB Silicon vs. Taiwan Semiconductor Manufacturing | X-FAB Silicon vs. Marvell Technology Group |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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