Correlation Between X FAB and Trainline Plc

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

Diversification Opportunities for X FAB and Trainline Plc

-0.83

Correlation Coefficient

X FAB  Trainline Plc

Pay attention - limited upside

The 3 months correlation between 0ROZ and Trainline is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Trainline Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trainline Plc 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 Trainline Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trainline Plc has no effect on the direction of X FAB i.e., X FAB and Trainline Plc go up and down completely randomly.

Pair Corralation between X FAB and Trainline Plc

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Trainline Plc. In addition to that, X FAB is 1.37 times more volatile than Trainline Plc. It trades about -0.08 of its total potential returns per unit of risk. Trainline Plc is currently generating about 0.21 per unit of volatility. If you would invest  30,360  in Trainline Plc on September 3, 2024 and sell it today you would earn a total of  10,420  from holding Trainline Plc or generate 34.32% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Trainline Plc

X FAB Silicon

Risk-Adjusted Performance

0 of 100

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Trainline Plc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trainline Plc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Trainline Plc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and Trainline Plc

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

The idea behind X FAB Silicon Foundries and Trainline Plc 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.