Correlation Between IMPERIAL TOBACCO and X Fab

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

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

Diversification Opportunities for IMPERIAL TOBACCO and X Fab

-0.32

Correlation Coefficient

IMPERIAL TOBACCO  X Fab

Very good diversification

The 3 months correlation between IMPERIAL and XFB is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and X Fab Silicon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X Fab Silicon and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and X Fab go up and down completely randomly.

Pair Corralation between IMPERIAL TOBACCO and X Fab

Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 1.31 times less return on investment than X Fab. But when comparing it to its historical volatility, IMPERIAL TOBACCO is 2.5 times less risky than X Fab. It trades about 0.31 of its potential returns per unit of risk. X Fab Silicon is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  422.00  in X Fab Silicon on October 6, 2024 and sell it today you would earn a total of  67.00  from holding X Fab Silicon or generate 15.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

IMPERIAL TOBACCO   vs.  X Fab Silicon

IMPERIAL TOBACCO

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, IMPERIAL TOBACCO unveiled 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 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, X Fab is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IMPERIAL TOBACCO and X Fab

The main advantage of trading using opposite IMPERIAL TOBACCO and X Fab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and X Fab Silicon 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..