Correlation Between X FAB and Air New
Can any of the company-specific risk be diversified away by investing in both X FAB and Air New 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 Air New 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 Air New Zealand, you can compare the effects of market volatilities on X FAB and Air New 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 Air New. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Air New.
Diversification Opportunities for X FAB and Air New
Very weak diversification
The 3 months correlation between XFB and Air is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Air New Zealand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air New Zealand 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 Air New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air New Zealand has no effect on the direction of X FAB i.e., X FAB and Air New go up and down completely randomly.
Pair Corralation between X FAB and Air New
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Air New. In addition to that, X FAB is 1.48 times more volatile than Air New Zealand. It trades about -0.02 of its total potential returns per unit of risk. Air New Zealand is currently generating about -0.01 per unit of volatility. If you would invest 36.00 in Air New Zealand on August 27, 2024 and sell it today you would lose (6.00) from holding Air New Zealand or give up 16.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Air New Zealand
Performance |
| Timeline |
| X FAB Silicon |
| Air New Zealand |
X FAB and Air New Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Air New
The main advantage of trading using opposite X FAB and Air New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Air New 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 Air New will offset losses from the drop in Air New's long position.The idea behind X FAB Silicon Foundries and Air New Zealand 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.| Air New vs. THRACE PLASTICS | Air New vs. Plastic Omnium | Air New vs. X FAB Silicon Foundries | Air New vs. MACOM Technology Solutions |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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