Correlation Between X Fab and VGP NV
Can any of the company-specific risk be diversified away by investing in both X Fab and VGP 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 VGP 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 VGP NV, you can compare the effects of market volatilities on X Fab and VGP 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 VGP NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Fab and VGP NV.
Diversification Opportunities for X Fab and VGP NV
Poor diversification
The 3 months correlation between XFAB and VGP is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding X Fab Silicon and VGP NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VGP 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 VGP NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VGP NV has no effect on the direction of X Fab i.e., X Fab and VGP NV go up and down completely randomly.
Pair Corralation between X Fab and VGP NV
Assuming the 90 days trading horizon X Fab Silicon is expected to under-perform the VGP NV. In addition to that, X Fab is 1.2 times more volatile than VGP NV. It trades about -0.03 of its total potential returns per unit of risk. VGP NV is currently generating about 0.01 per unit of volatility. If you would invest 7,794 in VGP NV on August 26, 2024 and sell it today you would earn a total of 136.00 from holding VGP NV or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
X Fab Silicon vs. VGP NV
Performance |
| Timeline |
| X Fab Silicon |
| VGP NV |
X Fab and VGP NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X Fab and VGP NV
The main advantage of trading using opposite X Fab and VGP NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Fab position performs unexpectedly, VGP 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 VGP NV will offset losses from the drop in VGP NV's long position.The idea behind X Fab Silicon and VGP 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.| VGP NV vs. Warehouses de Pauw | VGP NV vs. Sofina Socit Anonyme | VGP NV vs. Aedifica | VGP NV vs. Xior Student Housing |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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