Correlation Between Reliance Industries and X FAB

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

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

Diversification Opportunities for Reliance Industries and X FAB

0.28

Correlation Coefficient

Reliance Industries  X FAB

Modest diversification

The 3 months correlation between Reliance and 0ROZ is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd 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 Reliance Industries 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 Reliance Industries Ltd 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 Reliance Industries i.e., Reliance Industries and X FAB go up and down completely randomly.

Pair Corralation between Reliance Industries and X FAB

Assuming the 90 days trading horizon Reliance Industries Ltd is expected to under-perform the X FAB. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Industries Ltd is 6.43 times less risky than X FAB. The stock trades about -0.19 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  503.00  in X FAB Silicon Foundries on September 13, 2024 and sell it today you would earn a total of  297.00  from holding X FAB Silicon Foundries or generate 59.05% return on investment over 90 days.

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

Reliance Industries Ltd  vs.  X FAB Silicon Foundries

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Ltd 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 basic indicators remain comparatively stable which may send shares a bit higher in January 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

9 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, X FAB unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Industries and X FAB

The main advantage of trading using opposite Reliance Industries and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries Ltd 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.