Correlation Between WOOLWORTHS HLDGS and X-FAB Silicon

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Can any of the company-specific risk be diversified away by investing in both WOOLWORTHS HLDGS and X-FAB Silicon 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 WOOLWORTHS HLDGS and X-FAB Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WOOLWORTHS HLDGS and X FAB Silicon Foundries, you can compare the effects of market volatilities on WOOLWORTHS HLDGS and X-FAB Silicon 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 WOOLWORTHS HLDGS with a short position of X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of WOOLWORTHS HLDGS and X-FAB Silicon.

Diversification Opportunities for WOOLWORTHS HLDGS and X-FAB Silicon

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between WOOLWORTHS and X-FAB is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding WOOLWORTHS HLDGS 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 WOOLWORTHS HLDGS 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 WOOLWORTHS HLDGS are associated (or correlated) with X-FAB Silicon. 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 WOOLWORTHS HLDGS i.e., WOOLWORTHS HLDGS and X-FAB Silicon go up and down completely randomly.

Pair Corralation between WOOLWORTHS HLDGS and X-FAB Silicon

Assuming the 90 days trading horizon WOOLWORTHS HLDGS is expected to generate 2.82 times more return on investment than X-FAB Silicon. However, WOOLWORTHS HLDGS is 2.82 times more volatile than X FAB Silicon Foundries. It trades about 0.08 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  41.00  in WOOLWORTHS HLDGS on October 23, 2024 and sell it today you would earn a total of  269.00  from holding WOOLWORTHS HLDGS or generate 656.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

WOOLWORTHS HLDGS  vs.  X FAB Silicon Foundries

 Performance 
       Timeline  
WOOLWORTHS HLDGS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days WOOLWORTHS HLDGS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
X FAB Silicon 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 comparatively stable basic indicators, X-FAB Silicon is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

WOOLWORTHS HLDGS and X-FAB Silicon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WOOLWORTHS HLDGS and X-FAB Silicon

The main advantage of trading using opposite WOOLWORTHS HLDGS and X-FAB Silicon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WOOLWORTHS HLDGS position performs unexpectedly, X-FAB Silicon 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 Silicon will offset losses from the drop in X-FAB Silicon's long position.
The idea behind WOOLWORTHS HLDGS 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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