Correlation Between X FAB and DeVry Education
Can any of the company-specific risk be diversified away by investing in both X FAB and DeVry Education 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 DeVry Education 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 DeVry Education Group, you can compare the effects of market volatilities on X FAB and DeVry Education 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 DeVry Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and DeVry Education.
Diversification Opportunities for X FAB and DeVry Education
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between XFB and DeVry is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and DeVry Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeVry Education Group 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 DeVry Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeVry Education Group has no effect on the direction of X FAB i.e., X FAB and DeVry Education go up and down completely randomly.
Pair Corralation between X FAB and DeVry Education
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.56 times more return on investment than DeVry Education. However, X FAB is 1.56 times more volatile than DeVry Education Group. It trades about 0.2 of its potential returns per unit of risk. DeVry Education Group is currently generating about 0.06 per unit of risk. If you would invest 450.00 in X FAB Silicon Foundries on September 30, 2024 and sell it today you would earn a total of 51.00 from holding X FAB Silicon Foundries or generate 11.33% 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. DeVry Education Group
Performance |
| Timeline |
| X FAB Silicon |
| DeVry Education Group |
X FAB and DeVry Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and DeVry Education
The main advantage of trading using opposite X FAB and DeVry Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, DeVry Education 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 DeVry Education will offset losses from the drop in DeVry Education's long position.| X FAB vs. Verizon Communications | X FAB vs. Norwegian Air Shuttle | X FAB vs. HEMISPHERE EGY | X FAB vs. SEALED AIR |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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