Correlation Between Apple and X-FAB Silicon

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

Diversification Opportunities for Apple and X-FAB Silicon

-0.36

Correlation Coefficient

Apple  X-FAB Silicon

Very good diversification

The 3 months correlation between Apple and X-FAB is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and X-FAB Silicon go up and down completely randomly.

Pair Corralation between Apple and X-FAB Silicon

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.46 times more return on investment than X-FAB Silicon. However, Apple Inc is 2.18 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 -0.06 per unit of risk. If you would invest  20,365  in Apple Inc on September 3, 2024 and sell it today you would earn a total of  2,085  from holding Apple Inc or generate 10.24% return on investment over 90 days.

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

Apple Inc  vs.  X FAB Silicon Foundries

Apple Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Apple and X-FAB Silicon

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

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.