Correlation Between X-FAB Silicon and Ecolab

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

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

Diversification Opportunities for X-FAB Silicon and Ecolab

0.29

Correlation Coefficient

X-FAB Silicon  Ecolab

Modest diversification

The 3 months correlation between X-FAB and Ecolab is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Ecolab Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecolab Inc and X-FAB Silicon 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 Foundries are associated (or correlated) with Ecolab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecolab Inc has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Ecolab go up and down completely randomly.

Pair Corralation between X-FAB Silicon and Ecolab

Assuming the 90 days horizon X FAB Silicon Foundries is expected to generate 3.23 times more return on investment than Ecolab. However, X-FAB Silicon is 3.23 times more volatile than Ecolab Inc. It trades about -0.03 of its potential returns per unit of risk. Ecolab Inc is currently generating about -0.13 per unit of risk. If you would invest  558.00  in X FAB Silicon Foundries on October 23, 2024 and sell it today you would lose (47.00) from holding X FAB Silicon Foundries or give up 8.42% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  Ecolab Inc

X FAB Silicon

Risk-Adjusted Performance

0 of 100

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. Despite nearly stable fundamental drivers, X-FAB Silicon is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Ecolab Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ecolab Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with X-FAB Silicon and Ecolab

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

The idea behind X FAB Silicon Foundries and Ecolab Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.