Correlation Between X FAB and Polar Capital

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

Diversification Opportunities for X FAB and Polar Capital

0.72

Correlation Coefficient

X FAB  Polar Capital

Poor diversification

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

Pair Corralation between X FAB and Polar Capital

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Polar Capital. In addition to that, X FAB is 1.33 times more volatile than Polar Capital Technology. It trades about -0.14 of its total potential returns per unit of risk. Polar Capital Technology is currently generating about -0.11 per unit of volatility. If you would invest  34,700  in Polar Capital Technology on December 30, 2024 and sell it today you would lose (4,950) from holding Polar Capital Technology or give up 14.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

X FAB Silicon Foundries  vs.  Polar Capital Technology

X FAB Silicon

Risk-Adjusted Performance

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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Polar Capital Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Capital Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with X FAB and Polar Capital

The main advantage of trading using opposite X FAB and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital's long position.

The idea behind X FAB Silicon Foundries and Polar Capital Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..