Correlation Between X FAB and COMMERCIAL VEHICLE
Can any of the company-specific risk be diversified away by investing in both X FAB and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE, you can compare the effects of market volatilities on X FAB and COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and COMMERCIAL VEHICLE.
Diversification Opportunities for X FAB and COMMERCIAL VEHICLE
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between XFB and COMMERCIAL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and COMMERCIAL VEHICLE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMMERCIAL VEHICLE has no effect on the direction of X FAB i.e., X FAB and COMMERCIAL VEHICLE go up and down completely randomly.
Pair Corralation between X FAB and COMMERCIAL VEHICLE
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 0.75 times more return on investment than COMMERCIAL VEHICLE. However, X FAB Silicon Foundries is 1.34 times less risky than COMMERCIAL VEHICLE. It trades about -0.02 of its potential returns per unit of risk. COMMERCIAL VEHICLE is currently generating about -0.05 per unit of risk. If you would invest 672.00 in X FAB Silicon Foundries on September 4, 2024 and sell it today you would lose (233.00) from holding X FAB Silicon Foundries or give up 34.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. COMMERCIAL VEHICLE
Performance |
| Timeline |
| X FAB Silicon |
| COMMERCIAL VEHICLE |
X FAB and COMMERCIAL VEHICLE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and COMMERCIAL VEHICLE
The main advantage of trading using opposite X FAB and COMMERCIAL VEHICLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, COMMERCIAL VEHICLE 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 COMMERCIAL VEHICLE will offset losses from the drop in COMMERCIAL VEHICLE's long position.The idea behind X FAB Silicon Foundries and COMMERCIAL VEHICLE 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.| COMMERCIAL VEHICLE vs. TOTAL GABON | COMMERCIAL VEHICLE vs. Walgreens Boots Alliance | COMMERCIAL VEHICLE vs. Peak Resources Limited |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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