Correlation Between X Fab and Soditech

Can any of the company-specific risk be diversified away by investing in both X Fab and Soditech 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 Soditech 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 Soditech SA, you can compare the effects of market volatilities on X Fab and Soditech 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 Soditech. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Fab and Soditech.

Diversification Opportunities for X Fab and Soditech

-0.41

Correlation Coefficient

X Fab  Soditech

Very good diversification

The 3 months correlation between XFAB and Soditech is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding X Fab Silicon and Soditech SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soditech SA 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 Soditech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soditech SA has no effect on the direction of X Fab i.e., X Fab and Soditech go up and down completely randomly.

Pair Corralation between X Fab and Soditech

Assuming the 90 days trading horizon X Fab Silicon is expected to generate 1.08 times more return on investment than Soditech. However, X Fab is 1.08 times more volatile than Soditech SA. It trades about 0.01 of its potential returns per unit of risk. Soditech SA is currently generating about -0.01 per unit of risk. If you would invest  521.00  in X Fab Silicon on October 23, 2024 and sell it today you would lose (7.00) from holding X Fab Silicon or give up 1.34% of portfolio value over 90 days.

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

X Fab Silicon  vs.  Soditech SA

X Fab Silicon

Risk-Adjusted Performance

0 of 100

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 somewhat strong basic indicators, X Fab is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Soditech SA

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Soditech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Soditech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with X Fab and Soditech

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

The idea behind X Fab Silicon and Soditech 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.