Correlation Between X FAB and Universal Entertainment
Can any of the company-specific risk be diversified away by investing in both X FAB and Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment, you can compare the effects of market volatilities on X FAB and Universal Entertainment 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 Universal Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Universal Entertainment.
Diversification Opportunities for X FAB and Universal Entertainment
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between XFB and Universal is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment 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 Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of X FAB i.e., X FAB and Universal Entertainment go up and down completely randomly.
Pair Corralation between X FAB and Universal Entertainment
Assuming the 90 days trading horizon X FAB is expected to generate 5.72 times less return on investment than Universal Entertainment. But when comparing it to its historical volatility, X FAB Silicon Foundries is 1.05 times less risky than Universal Entertainment. It trades about 0.03 of its potential returns per unit of risk. Universal Entertainment is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 615.00 in Universal Entertainment on November 3, 2024 and sell it today you would earn a total of 70.00 from holding Universal Entertainment or generate 11.38% 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. Universal Entertainment
Performance |
| Timeline |
| X FAB Silicon |
| Universal Entertainment |
X FAB and Universal Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Universal Entertainment
The main advantage of trading using opposite X FAB and Universal Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Universal Entertainment 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 Universal Entertainment will offset losses from the drop in Universal Entertainment's long position.| X FAB vs. SIVERS SEMICONDUCTORS AB | X FAB vs. NorAm Drilling AS | X FAB vs. Volkswagen AG | X FAB vs. Darden Restaurants |
| Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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