Correlation Between X FAB and Align Technology
Can any of the company-specific risk be diversified away by investing in both X FAB and Align Technology 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 Align Technology 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 Align Technology, you can compare the effects of market volatilities on X FAB and Align Technology 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 Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Align Technology.
Diversification Opportunities for X FAB and Align Technology
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between XFB and Align is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of X FAB i.e., X FAB and Align Technology go up and down completely randomly.
Pair Corralation between X FAB and Align Technology
Assuming the 90 days trading horizon X FAB is expected to generate 1.01 times less return on investment than Align Technology. In addition to that, X FAB is 1.85 times more volatile than Align Technology. It trades about 0.13 of its total potential returns per unit of risk. Align Technology is currently generating about 0.24 per unit of volatility. If you would invest 20,600 in Align Technology on September 12, 2024 and sell it today you would earn a total of 1,870 from holding Align Technology or generate 9.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Align Technology
Performance |
| Timeline |
| X FAB Silicon |
| Align Technology |
X FAB and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Align Technology
The main advantage of trading using opposite X FAB and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's long position.The idea behind X FAB Silicon Foundries and Align Technology 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.| Align Technology vs. Superior Plus Corp | Align Technology vs. SIVERS SEMICONDUCTORS AB | Align Technology vs. Norsk Hydro ASA | Align Technology vs. Reliance Steel Aluminum |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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