Correlation Between X FAB and BANNER

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Can any of the company-specific risk be diversified away by investing in both X FAB and BANNER 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 BANNER 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 BANNER, you can compare the effects of market volatilities on X FAB and BANNER 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 BANNER. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and BANNER.

Diversification Opportunities for X FAB and BANNER

-0.14
  Correlation Coefficient

Good diversification

The 3 months correlation between XFB and BANNER is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and BANNER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANNER 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 BANNER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANNER has no effect on the direction of X FAB i.e., X FAB and BANNER go up and down completely randomly.

Pair Corralation between X FAB and BANNER

Assuming the 90 days trading horizon X FAB is expected to generate 1.16 times less return on investment than BANNER. In addition to that, X FAB is 1.11 times more volatile than BANNER. It trades about 0.08 of its total potential returns per unit of risk. BANNER is currently generating about 0.1 per unit of volatility. If you would invest  5,902  in BANNER on October 25, 2024 and sell it today you would earn a total of  848.00  from holding BANNER or generate 14.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.33%
ValuesDaily Returns

X FAB Silicon Foundries  vs.  BANNER

 Performance 
       Timeline  
X FAB Silicon 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, X FAB exhibited solid returns over the last few months and may actually be approaching a breakup point.
BANNER 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BANNER are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, BANNER exhibited solid returns over the last few months and may actually be approaching a breakup point.

X FAB and BANNER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with X FAB and BANNER

The main advantage of trading using opposite X FAB and BANNER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, BANNER 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 BANNER will offset losses from the drop in BANNER's long position.
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The idea behind X FAB Silicon Foundries and BANNER 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.
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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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