Correlation Between X FAB and Mosaic
Can any of the company-specific risk be diversified away by investing in both X FAB and Mosaic 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 Mosaic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X FAB Silicon Foundries and The Mosaic, you can compare the effects of market volatilities on X FAB and Mosaic 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 Mosaic. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Mosaic.
Diversification Opportunities for X FAB and Mosaic
Significant diversification
The 3 months correlation between XFABF and Mosaic is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and The Mosaic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mosaic 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 Foundries are associated (or correlated) with Mosaic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mosaic has no effect on the direction of X FAB i.e., X FAB and Mosaic go up and down completely randomly.
Pair Corralation between X FAB and Mosaic
Assuming the 90 days horizon X FAB Silicon Foundries is expected to under-perform the Mosaic. In addition to that, X FAB is 1.25 times more volatile than The Mosaic. It trades about -0.29 of its total potential returns per unit of risk. The Mosaic is currently generating about -0.09 per unit of volatility. If you would invest 2,717 in The Mosaic on August 31, 2024 and sell it today you would lose (144.00) from holding The Mosaic or give up 5.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. The Mosaic
Performance |
| Timeline |
| X FAB Silicon |
| Mosaic |
X FAB and Mosaic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Mosaic
The main advantage of trading using opposite X FAB and Mosaic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Mosaic 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 Mosaic will offset losses from the drop in Mosaic's long position.| X FAB vs. NVIDIA | X FAB vs. Intel | X FAB vs. Taiwan Semiconductor Manufacturing | X FAB 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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