Correlation Between X FAB and Small Cap
Can any of the company-specific risk be diversified away by investing in both X FAB and Small Cap 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 Small Cap 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 Small Cap Premium, you can compare the effects of market volatilities on X FAB and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Small Cap.
Diversification Opportunities for X FAB and Small Cap
Excellent diversification
The 3 months correlation between XFABF and Small is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of X FAB i.e., X FAB and Small Cap go up and down completely randomly.
Pair Corralation between X FAB and Small Cap
Assuming the 90 days horizon X FAB Silicon Foundries is expected to under-perform the Small Cap. In addition to that, X FAB is 5.48 times more volatile than Small Cap Premium. It trades about -0.15 of its total potential returns per unit of risk. Small Cap Premium is currently generating about 0.05 per unit of volatility. If you would invest 2,407 in Small Cap Premium on August 31, 2024 and sell it today you would earn a total of 39.00 from holding Small Cap Premium or generate 1.62% 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. Small Cap Premium
Performance |
Timeline |
X FAB Silicon |
Small Cap Premium |
X FAB and Small Cap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with X FAB and Small Cap
The main advantage of trading using opposite X FAB and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.X FAB vs. NVIDIA | X FAB vs. Intel | X FAB vs. Taiwan Semiconductor Manufacturing | X FAB vs. Marvell Technology Group |
Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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