Correlation Between Nissan Chemical and X-FAB Silicon

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

Diversification Opportunities for Nissan Chemical and X-FAB Silicon

-0.26

Correlation Coefficient

Nissan Chemical  X-FAB Silicon

Very good diversification

The 3 months correlation between Nissan and X-FAB is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nissan Chemical Corp 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 Nissan Chemical 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 Nissan Chemical Corp 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 Nissan Chemical i.e., Nissan Chemical and X-FAB Silicon go up and down completely randomly.

Pair Corralation between Nissan Chemical and X-FAB Silicon

Assuming the 90 days trading horizon Nissan Chemical Corp is expected to generate 0.7 times more return on investment than X-FAB Silicon. However, Nissan Chemical Corp is 1.43 times less risky than X-FAB Silicon. It trades about -0.04 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  3,740  in Nissan Chemical Corp on October 9, 2024 and sell it today you would lose (800.00) from holding Nissan Chemical Corp or give up 21.39% of portfolio value over 90 days.

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

Nissan Chemical Corp  vs.  X FAB Silicon Foundries

Nissan Chemical Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nissan Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 Nissan Chemical and X-FAB Silicon

The main advantage of trading using opposite Nissan Chemical and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nissan Chemical 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 Nissan Chemical Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.