Correlation Between X FAB and Retail Estates

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

Diversification Opportunities for X FAB and Retail Estates

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between XFB and Retail is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of X FAB i.e., X FAB and Retail Estates go up and down completely randomly.

Pair Corralation between X FAB and Retail Estates

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Retail Estates. In addition to that, X FAB is 1.85 times more volatile than Retail Estates NV. It trades about -0.02 of its total potential returns per unit of risk. Retail Estates NV is currently generating about 0.03 per unit of volatility. If you would invest  4,849  in Retail Estates NV on September 4, 2024 and sell it today you would earn a total of  981.00  from holding Retail Estates NV or generate 20.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

X FAB Silicon Foundries  vs.  Retail Estates NV

 Performance 
       Timeline  
X FAB Silicon 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Retail Estates NV 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

X FAB and Retail Estates Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with X FAB and Retail Estates

The main advantage of trading using opposite X FAB and Retail Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Retail Estates 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 Retail Estates will offset losses from the drop in Retail Estates' long position.
The idea behind X FAB Silicon Foundries and Retail Estates NV 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.

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