Correlation Between X Fab and Fill Up
Can any of the company-specific risk be diversified away by investing in both X Fab and Fill Up 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 X Fab and Fill Up into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X Fab Silicon and Fill Up Media, you can compare the effects of market volatilities on X Fab and Fill Up 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 X Fab with a short position of Fill Up. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Fab and Fill Up.
Diversification Opportunities for X Fab and Fill Up
Weak diversification
The 3 months correlation between XFAB and Fill is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding X Fab Silicon and Fill Up Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fill Up Media and X Fab 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 X Fab Silicon are associated (or correlated) with Fill Up. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fill Up Media has no effect on the direction of X Fab i.e., X Fab and Fill Up go up and down completely randomly.
Pair Corralation between X Fab and Fill Up
Assuming the 90 days trading horizon X Fab Silicon is expected to under-perform the Fill Up. In addition to that, X Fab is 1.56 times more volatile than Fill Up Media. It trades about -0.08 of its total potential returns per unit of risk. Fill Up Media is currently generating about 0.16 per unit of volatility. If you would invest 550.00 in Fill Up Media on August 28, 2024 and sell it today you would earn a total of 35.00 from holding Fill Up Media or generate 6.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
X Fab Silicon vs. Fill Up Media
Performance |
| Timeline |
| X Fab Silicon |
| Fill Up Media |
X Fab and Fill Up Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X Fab and Fill Up
The main advantage of trading using opposite X Fab and Fill Up positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Fab position performs unexpectedly, Fill Up 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 Fill Up will offset losses from the drop in Fill Up's long position.The idea behind X Fab Silicon and Fill Up Media 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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