Correlation Between X-FAB Silicon and China Communications
Can any of the company-specific risk be diversified away by investing in both X-FAB Silicon and China Communications 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 Silicon and China Communications 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 China Communications Services, you can compare the effects of market volatilities on X-FAB Silicon and China Communications 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 Silicon with a short position of China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of X-FAB Silicon and China Communications.
Diversification Opportunities for X-FAB Silicon and China Communications
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between X-FAB and China is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications and X-FAB Silicon 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and China Communications go up and down completely randomly.
Pair Corralation between X-FAB Silicon and China Communications
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the China Communications. But the stock apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 2.36 times less risky than China Communications. The stock trades about -0.07 of its potential returns per unit of risk. The China Communications Services is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 19.00 in China Communications Services on November 4, 2024 and sell it today you would earn a total of 34.00 from holding China Communications Services or generate 178.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. China Communications Services
Performance |
| Timeline |
| X FAB Silicon |
| China Communications |
X-FAB Silicon and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X-FAB Silicon and China Communications
The main advantage of trading using opposite X-FAB Silicon and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X-FAB Silicon position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.| X-FAB Silicon vs. KOBE STEEL LTD | X-FAB Silicon vs. Diamyd Medical AB | X-FAB Silicon vs. MOUNT GIBSON IRON | X-FAB Silicon vs. ONWARD MEDICAL BV |
| China Communications vs. T Mobile | China Communications vs. China Mobile Limited | China Communications vs. Verizon Communications | China Communications vs. ATT 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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