Correlation Between Strong Petrochemical and X FAB

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

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

Diversification Opportunities for Strong Petrochemical and X FAB

0.09

Correlation Coefficient

Strong Petrochemical  X FAB

Significant diversification

The 3 months correlation between Strong and XFB is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Strong Petrochemical 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 Strong Petrochemical 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 Strong Petrochemical Holdings 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 Strong Petrochemical i.e., Strong Petrochemical and X FAB go up and down completely randomly.

Pair Corralation between Strong Petrochemical and X FAB

Assuming the 90 days trading horizon Strong Petrochemical Holdings is expected to generate 0.41 times more return on investment than X FAB. However, Strong Petrochemical Holdings is 2.44 times less risky than X FAB. It trades about -0.13 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.09 per unit of risk. If you would invest  1.20  in Strong Petrochemical Holdings on December 25, 2024 and sell it today you would lose (0.10) from holding Strong Petrochemical Holdings or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Strong Petrochemical Holdings  vs.  X FAB Silicon Foundries

Strong Petrochemical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strong Petrochemical Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Strong Petrochemical and X FAB

The main advantage of trading using opposite Strong Petrochemical and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strong Petrochemical 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 Strong Petrochemical 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.