Correlation Between X-FAB Silicon and Bank of China
Can any of the company-specific risk be diversified away by investing in both X-FAB Silicon and Bank of China 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 Bank of China 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 Bank of China, you can compare the effects of market volatilities on X-FAB Silicon and Bank of China 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 Bank of China. Check out your portfolio center. Please also check ongoing floating volatility patterns of X-FAB Silicon and Bank of China.
Diversification Opportunities for X-FAB Silicon and Bank of China
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between X-FAB and Bank is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Bank of China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of China 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 Bank of China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of China has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Bank of China go up and down completely randomly.
Pair Corralation between X-FAB Silicon and Bank of China
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.45 times more return on investment than Bank of China. However, X-FAB Silicon is 1.45 times more volatile than Bank of China. It trades about 0.09 of its potential returns per unit of risk. Bank of China is currently generating about 0.01 per unit of risk. If you would invest 417.00 in X FAB Silicon Foundries on September 4, 2024 and sell it today you would earn a total of 19.00 from holding X FAB Silicon Foundries or generate 4.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Bank of China
Performance |
| Timeline |
| X FAB Silicon |
| Bank of China |
X-FAB Silicon and Bank of China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X-FAB Silicon and Bank of China
The main advantage of trading using opposite X-FAB Silicon and Bank of China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X-FAB Silicon position performs unexpectedly, Bank of China 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 Bank of China will offset losses from the drop in Bank of China's long position.| X-FAB Silicon vs. Suntory Beverage Food | X-FAB Silicon vs. SMA Solar Technology | X-FAB Silicon vs. Microchip Technology Incorporated | X-FAB Silicon vs. Micron Technology |
| Bank of China vs. GOODYEAR T RUBBER | Bank of China vs. X FAB Silicon Foundries | Bank of China vs. Sumitomo Rubber Industries | Bank of China vs. Vishay Intertechnology |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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