Correlation Between X FAB and Northland Power
Can any of the company-specific risk be diversified away by investing in both X FAB and Northland Power 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 Northland Power 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 Northland Power, you can compare the effects of market volatilities on X FAB and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Northland Power.
Diversification Opportunities for X FAB and Northland Power
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between XFB and Northland is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of X FAB i.e., X FAB and Northland Power go up and down completely randomly.
Pair Corralation between X FAB and Northland Power
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 0.85 times more return on investment than Northland Power. However, X FAB Silicon Foundries is 1.17 times less risky than Northland Power. It trades about 0.06 of its potential returns per unit of risk. Northland Power is currently generating about -0.14 per unit of risk. If you would invest 483.00 in X FAB Silicon Foundries on November 4, 2024 and sell it today you would earn a total of 15.00 from holding X FAB Silicon Foundries or generate 3.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Northland Power
Performance |
| Timeline |
| X FAB Silicon |
| Northland Power |
X FAB and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Northland Power
The main advantage of trading using opposite X FAB and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power's long position.The idea behind X FAB Silicon Foundries and Northland Power 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.| Northland Power vs. SEI INVESTMENTS | Northland Power vs. TYSON FOODS A | Northland Power vs. PennantPark Investment | Northland Power vs. New Residential Investment |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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