Correlation Between ITALIAN WINE and X-FAB Silicon

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

Diversification Opportunities for ITALIAN WINE and X-FAB Silicon

-0.04

Correlation Coefficient

ITALIAN WINE  X-FAB Silicon

Good diversification

The 3 months correlation between ITALIAN and X-FAB is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS 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 ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and X-FAB Silicon go up and down completely randomly.

Pair Corralation between ITALIAN WINE and X-FAB Silicon

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to generate 0.71 times more return on investment than X-FAB Silicon. However, ITALIAN WINE BRANDS is 1.41 times less risky than X-FAB Silicon. It trades about 0.07 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.05 per unit of risk. If you would invest  2,050  in ITALIAN WINE BRANDS on October 4, 2024 and sell it today you would earn a total of  350.00  from holding ITALIAN WINE BRANDS or generate 17.07% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  X FAB Silicon Foundries

ITALIAN WINE BRANDS

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITALIAN WINE 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ITALIAN WINE and X-FAB Silicon

The main advantage of trading using opposite ITALIAN WINE and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.