Correlation Between X FAB and Luxfer Holdings

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

Diversification Opportunities for X FAB and Luxfer Holdings

-0.77

Correlation Coefficient

X FAB  Luxfer Holdings

Pay attention - limited upside

The 3 months correlation between XFABF and Luxfer is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC 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 Foundries are associated (or correlated) with Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of X FAB i.e., X FAB and Luxfer Holdings go up and down completely randomly.

Pair Corralation between X FAB and Luxfer Holdings

Assuming the 90 days horizon X FAB Silicon Foundries is expected to under-perform the Luxfer Holdings. In addition to that, X FAB is 1.18 times more volatile than Luxfer Holdings PLC. It trades about -0.03 of its total potential returns per unit of risk. Luxfer Holdings PLC is currently generating about 0.05 per unit of volatility. If you would invest  1,284  in Luxfer Holdings PLC on October 21, 2024 and sell it today you would earn a total of  89.00  from holding Luxfer Holdings PLC or generate 6.93% 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 Foundries  vs.  Luxfer Holdings PLC

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 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Luxfer Holdings PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Luxfer Holdings PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, Luxfer Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with X FAB and Luxfer Holdings

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

The idea behind X FAB Silicon Foundries and Luxfer Holdings PLC 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .