Correlation Between SWISS WATER and X-FAB Silicon

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

Diversification Opportunities for SWISS WATER and X-FAB Silicon

-0.5

Correlation Coefficient

SWISS WATER  X-FAB Silicon

Very good diversification

The 3 months correlation between SWISS and X-FAB is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE 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 SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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 SWISS WATER i.e., SWISS WATER and X-FAB Silicon go up and down completely randomly.

Pair Corralation between SWISS WATER and X-FAB Silicon

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 0.78 times more return on investment than X-FAB Silicon. However, SWISS WATER DECAFFCOFFEE is 1.28 times less risky than X-FAB Silicon. It trades about 0.11 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.07 per unit of risk. If you would invest  232.00  in SWISS WATER DECAFFCOFFEE on September 2, 2024 and sell it today you would earn a total of  40.00  from holding SWISS WATER DECAFFCOFFEE or generate 17.24% return on investment over 90 days.

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

SWISS WATER DECAFFCOFFEE  vs.  X FAB Silicon Foundries

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SWISS WATER reported solid returns over the last few months and may actually be approaching a breakup point.

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 fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with SWISS WATER and X-FAB Silicon

The main advantage of trading using opposite SWISS WATER and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.