Correlation Between NVIDIA and X Fab

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

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

Diversification Opportunities for NVIDIA and X Fab

0.7

Correlation Coefficient

NVIDIA  X Fab

Poor diversification

The 3 months correlation between NVIDIA and XFB is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA 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 NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and X Fab go up and down completely randomly.

Pair Corralation between NVIDIA and X Fab

Assuming the 90 days trading horizon NVIDIA is expected to under-perform the X Fab. In addition to that, NVIDIA is 1.33 times more volatile than X Fab Silicon. It trades about -0.08 of its total potential returns per unit of risk. X Fab Silicon is currently generating about -0.1 per unit of volatility. If you would invest  496.00  in X Fab Silicon on December 29, 2024 and sell it today you would lose (96.00) from holding X Fab Silicon or give up 19.35% of portfolio value over 90 days.

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

NVIDIA  vs.  X Fab Silicon

NVIDIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVIDIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

X Fab Silicon

Risk-Adjusted Performance

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NVIDIA and X Fab

The main advantage of trading using opposite NVIDIA and X Fab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.