Correlation Between Easy Software and X-FAB Silicon

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

Diversification Opportunities for Easy Software and X-FAB Silicon

-0.01

Correlation Coefficient

Easy Software  X-FAB Silicon

Good diversification

The 3 months correlation between Easy and X-FAB is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Easy Software AG 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 Easy Software 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 Easy Software AG 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 Easy Software i.e., Easy Software and X-FAB Silicon go up and down completely randomly.

Pair Corralation between Easy Software and X-FAB Silicon

Assuming the 90 days trading horizon Easy Software AG is expected to generate 0.39 times more return on investment than X-FAB Silicon. However, Easy Software AG is 2.53 times less risky than X-FAB Silicon. It trades about 0.13 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.17 per unit of risk. If you would invest  1,770  in Easy Software AG on December 20, 2024 and sell it today you would earn a total of  50.00  from holding Easy Software AG or generate 2.82% return on investment over 90 days.

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

Easy Software AG  vs.  X FAB Silicon Foundries

Easy Software AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Easy Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Easy Software is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 rather sound fundamental drivers, X-FAB Silicon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Easy Software and X-FAB Silicon

The main advantage of trading using opposite Easy Software and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Easy Software 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 Easy Software AG 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.