Correlation Between Toho Co and X FAB

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

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

Diversification Opportunities for Toho Co and X FAB

-0.42

Correlation Coefficient

Toho Co  X FAB

Very good diversification

The 3 months correlation between Toho and XFB is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Toho Co 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 Toho Co 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 Toho Co 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 Toho Co i.e., Toho Co and X FAB go up and down completely randomly.

Pair Corralation between Toho Co and X FAB

Assuming the 90 days horizon Toho Co is expected to generate 0.71 times more return on investment than X FAB. However, Toho Co is 1.41 times less risky than X FAB. It trades about 0.07 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.02 per unit of risk. If you would invest  4,060  in Toho Co on December 19, 2024 and sell it today you would earn a total of  260.00  from holding Toho Co or generate 6.4% return on investment over 90 days.

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

Toho Co  vs.  X FAB Silicon Foundries

Toho Co

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toho Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Toho Co may actually be approaching a critical reversion point that can send shares even higher in April 2025.

X FAB Silicon

Risk-Adjusted Performance

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Toho Co and X FAB

The main advantage of trading using opposite Toho Co and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toho Co 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 Toho Co 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.