Correlation Between Power Assets and X-FAB Silicon

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

Diversification Opportunities for Power Assets and X-FAB Silicon

-0.21

Correlation Coefficient

Power Assets  X-FAB Silicon

Very good diversification

The 3 months correlation between Power and X-FAB is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Power Assets Holdings 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 Power Assets 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 Power Assets Holdings 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 Power Assets i.e., Power Assets and X-FAB Silicon go up and down completely randomly.

Pair Corralation between Power Assets and X-FAB Silicon

Assuming the 90 days horizon Power Assets Holdings is expected to generate 1.27 times more return on investment than X-FAB Silicon. However, Power Assets is 1.27 times more volatile than X FAB Silicon Foundries. 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  294.00  in Power Assets Holdings on October 9, 2024 and sell it today you would earn a total of  356.00  from holding Power Assets Holdings or generate 121.09% return on investment over 90 days.

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

Power Assets Holdings  vs.  X FAB Silicon Foundries

Power Assets Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power Assets Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Power Assets 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 comparatively stable basic indicators, X-FAB Silicon is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Power Assets and X-FAB Silicon

The main advantage of trading using opposite Power Assets and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Assets 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 Power Assets Holdings 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.