Correlation Between X Fab and X-FAB Silicon
Can any of the company-specific risk be diversified away by investing in both X Fab and X-FAB Silicon 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 X-FAB Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X Fab Silicon and X FAB Silicon Foundries, you can compare the effects of market volatilities on X Fab and X-FAB Silicon 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 X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Fab and X-FAB Silicon.
Diversification Opportunities for X Fab and X-FAB Silicon
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between XFB and X-FAB is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding X Fab Silicon and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 are associated (or correlated) with X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of X Fab i.e., X Fab and X-FAB Silicon go up and down completely randomly.
Pair Corralation between X Fab and X-FAB Silicon
Assuming the 90 days horizon X Fab is expected to generate 1.59 times less return on investment than X-FAB Silicon. But when comparing it to its historical volatility, X Fab Silicon is 1.04 times less risky than X-FAB Silicon. It trades about 0.05 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 435.00 in X FAB Silicon Foundries on September 1, 2024 and sell it today you would earn a total of 15.00 from holding X FAB Silicon Foundries or generate 3.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
X Fab Silicon vs. X FAB Silicon Foundries
Performance |
| Timeline |
| X Fab Silicon |
| X FAB Silicon |
X Fab and X-FAB Silicon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X Fab and X-FAB Silicon
The main advantage of trading using opposite X Fab and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Fab position performs unexpectedly, X-FAB Silicon 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 X-FAB Silicon will offset losses from the drop in X-FAB Silicon's long position.The idea behind X Fab Silicon and X FAB Silicon Foundries 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.| X-FAB Silicon vs. Apple Inc | X-FAB Silicon vs. Apple Inc | X-FAB Silicon vs. Apple Inc | X-FAB Silicon 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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