Correlation Between Whirlpool and X FAB

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

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

Diversification Opportunities for Whirlpool and X FAB

-0.32

Correlation Coefficient

Whirlpool  X FAB

Very good diversification

The 3 months correlation between Whirlpool and XFB is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool 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 Whirlpool 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 Whirlpool 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 Whirlpool i.e., Whirlpool and X FAB go up and down completely randomly.

Pair Corralation between Whirlpool and X FAB

Assuming the 90 days horizon Whirlpool is expected to generate 0.82 times more return on investment than X FAB. However, Whirlpool is 1.22 times less risky than X FAB. It trades about 0.04 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.09 per unit of risk. If you would invest  10,095  in Whirlpool on September 15, 2024 and sell it today you would earn a total of  1,630  from holding Whirlpool or generate 16.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Whirlpool  vs.  X FAB Silicon Foundries

Whirlpool

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Whirlpool are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Whirlpool reported solid returns over the last few months and may actually be approaching a breakup point.

X FAB Silicon

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Whirlpool and X FAB

The main advantage of trading using opposite Whirlpool and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Whirlpool 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 Whirlpool 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.