Correlation Between X Fab and Melexis NV
Can any of the company-specific risk be diversified away by investing in both X Fab and Melexis NV 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 Melexis NV 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 Melexis NV, you can compare the effects of market volatilities on X Fab and Melexis NV 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 Melexis NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Fab and Melexis NV.
Diversification Opportunities for X Fab and Melexis NV
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between XFAB and Melexis is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding X Fab Silicon and Melexis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melexis NV 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 Melexis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melexis NV has no effect on the direction of X Fab i.e., X Fab and Melexis NV go up and down completely randomly.
Pair Corralation between X Fab and Melexis NV
Assuming the 90 days trading horizon X Fab Silicon is expected to under-perform the Melexis NV. In addition to that, X Fab is 1.16 times more volatile than Melexis NV. It trades about -0.03 of its total potential returns per unit of risk. Melexis NV is currently generating about -0.02 per unit of volatility. If you would invest 7,635 in Melexis NV on August 30, 2024 and sell it today you would lose (2,070) from holding Melexis NV or give up 27.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
X Fab Silicon vs. Melexis NV
Performance |
| Timeline |
| X Fab Silicon |
| Melexis NV |
X Fab and Melexis NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X Fab and Melexis NV
The main advantage of trading using opposite X Fab and Melexis NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Fab position performs unexpectedly, Melexis NV 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 Melexis NV will offset losses from the drop in Melexis NV's long position.The idea behind X Fab Silicon and Melexis NV 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.| Melexis NV vs. Ackermans Van Haaren | Melexis NV vs. Sofina Socit Anonyme | Melexis NV vs. ageas SANV | Melexis NV vs. Barco NV |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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