Correlation Between X FAB and NVIDIA
Can any of the company-specific risk be diversified away by investing in both X FAB and NVIDIA 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 NVIDIA 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 NVIDIA, you can compare the effects of market volatilities on X FAB and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and NVIDIA.
Diversification Opportunities for X FAB and NVIDIA
Excellent diversification
The 3 months correlation between XFABF and NVIDIA is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of X FAB i.e., X FAB and NVIDIA go up and down completely randomly.
Pair Corralation between X FAB and NVIDIA
Assuming the 90 days horizon X FAB Silicon Foundries is expected to under-perform the NVIDIA. But the pink sheet apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 1.4 times less risky than NVIDIA. The pink sheet trades about -0.14 of its potential returns per unit of risk. The NVIDIA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 11,642 in NVIDIA on September 2, 2024 and sell it today you would earn a total of 2,183 from holding NVIDIA or generate 18.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. NVIDIA
Performance |
| Timeline |
| X FAB Silicon |
| NVIDIA |
X FAB and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and NVIDIA
The main advantage of trading using opposite X FAB and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| X FAB vs. Power Integrations | X FAB vs. MACOM Technology Solutions | X FAB vs. Intchains Group Limited | X FAB vs. Vishay Intertechnology |
| NVIDIA vs. Intel | NVIDIA vs. Taiwan Semiconductor Manufacturing | NVIDIA vs. Marvell Technology Group | NVIDIA vs. Micron Technology |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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