Correlation Between PT Ace and X-FAB Silicon

Can any of the company-specific risk be diversified away by investing in both PT Ace 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 PT Ace 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 PT Ace Hardware and X FAB Silicon Foundries, you can compare the effects of market volatilities on PT Ace 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 PT Ace with a short position of X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Ace and X-FAB Silicon.

Diversification Opportunities for PT Ace and X-FAB Silicon

0.43

Correlation Coefficient

PT Ace  X-FAB Silicon

Very weak diversification

The 3 months correlation between 4AH1 and X-FAB is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding PT Ace Hardware 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 PT Ace 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 PT Ace Hardware 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 PT Ace i.e., PT Ace and X-FAB Silicon go up and down completely randomly.

Pair Corralation between PT Ace and X-FAB Silicon

Assuming the 90 days trading horizon PT Ace Hardware is expected to generate 5.94 times more return on investment than X-FAB Silicon. However, PT Ace is 5.94 times more volatile than X FAB Silicon Foundries. It trades about 0.07 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.06 per unit of risk. If you would invest  4.05  in PT Ace Hardware on December 21, 2024 and sell it today you would lose (0.05) from holding PT Ace Hardware or give up 1.23% of portfolio value over 90 days.

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

PT Ace Hardware  vs.  X FAB Silicon Foundries

PT Ace Hardware

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Ace Hardware are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, PT Ace reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest fragile performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with PT Ace and X-FAB Silicon

The main advantage of trading using opposite PT Ace and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Ace 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 PT Ace Hardware 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.