Correlation Between Kering SA and X FAB

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

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

Diversification Opportunities for Kering SA and X FAB

0.6

Correlation Coefficient

Kering SA  X FAB

Poor diversification

The 3 months correlation between Kering and XFB is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Kering SA 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 Kering SA 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 Kering SA 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 Kering SA i.e., Kering SA and X FAB go up and down completely randomly.

Pair Corralation between Kering SA and X FAB

Assuming the 90 days trading horizon Kering SA is expected to under-perform the X FAB. But the stock apears to be less risky and, when comparing its historical volatility, Kering SA is 1.6 times less risky than X FAB. The stock trades about -0.18 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  500.00  in X FAB Silicon Foundries on October 11, 2024 and sell it today you would lose (5.00) from holding X FAB Silicon Foundries or give up 1.0% of portfolio value over 90 days.

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

Kering SA  vs.  X FAB Silicon Foundries

Kering SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kering SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Kering SA is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the 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 rather sound fundamental drivers, X FAB is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kering SA and X FAB

The main advantage of trading using opposite Kering SA and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kering SA 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 Kering SA 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.