Correlation Between X Fab and Eutelsat Communications

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

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

Diversification Opportunities for X Fab and Eutelsat Communications

-0.62

Correlation Coefficient

X Fab  Eutelsat Communications

Excellent diversification

The 3 months correlation between XFAB and Eutelsat is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding X Fab Silicon and Eutelsat Communications SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eutelsat Communications and X Fab 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 X Fab Silicon are associated (or correlated) with Eutelsat Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eutelsat Communications has no effect on the direction of X Fab i.e., X Fab and Eutelsat Communications go up and down completely randomly.

Pair Corralation between X Fab and Eutelsat Communications

Assuming the 90 days trading horizon X Fab Silicon is expected to under-perform the Eutelsat Communications. But the stock apears to be less risky and, when comparing its historical volatility, X Fab Silicon is 7.95 times less risky than Eutelsat Communications. The stock trades about -0.13 of its potential returns per unit of risk. The Eutelsat Communications SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  227.00  in Eutelsat Communications SA on December 30, 2024 and sell it today you would earn a total of  180.00  from holding Eutelsat Communications SA or generate 79.3% return on investment over 90 days.

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

X Fab Silicon  vs.  Eutelsat Communications SA

X Fab Silicon

Risk-Adjusted Performance

Very Weak

Over the last 90 days X Fab Silicon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Eutelsat Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eutelsat Communications SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Eutelsat Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Fab and Eutelsat Communications

The main advantage of trading using opposite X Fab and Eutelsat Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X Fab position performs unexpectedly, Eutelsat Communications 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 Eutelsat Communications will offset losses from the drop in Eutelsat Communications' long position.

The idea behind X Fab Silicon and Eutelsat Communications SA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.