Correlation Between PARKEN Sport and X FAB

Can any of the company-specific risk be diversified away by investing in both PARKEN Sport and X FAB 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 PARKEN Sport and X FAB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PARKEN Sport Entertainment and X FAB Silicon Foundries, you can compare the effects of market volatilities on PARKEN Sport and X FAB 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 PARKEN Sport with a short position of X FAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of PARKEN Sport and X FAB.

Diversification Opportunities for PARKEN Sport and X FAB

0.63

Correlation Coefficient

PARKEN Sport  X FAB

Poor diversification

The 3 months correlation between PARKEN and XFB is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PARKEN Sport Entertainment 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 PARKEN Sport 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 PARKEN Sport Entertainment are associated (or correlated) with X FAB. 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 PARKEN Sport i.e., PARKEN Sport and X FAB go up and down completely randomly.

Pair Corralation between PARKEN Sport and X FAB

Assuming the 90 days horizon PARKEN Sport Entertainment is expected to generate 0.98 times more return on investment than X FAB. However, PARKEN Sport Entertainment is 1.02 times less risky than X FAB. It trades about 0.18 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.01 per unit of risk. If you would invest  1,685  in PARKEN Sport Entertainment on October 26, 2024 and sell it today you would earn a total of  150.00  from holding PARKEN Sport Entertainment or generate 8.9% return on investment over 90 days.

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

PARKEN Sport Entertainment  vs.  X FAB Silicon Foundries

PARKEN Sport Enterta

Risk-Adjusted Performance

8 of 100

OK

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

X FAB Silicon

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, X FAB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PARKEN Sport and X FAB

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

The idea behind PARKEN Sport Entertainment 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.