Correlation Between X FAB and RLX Technology

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

Diversification Opportunities for X FAB and RLX Technology

-0.12

Correlation Coefficient

X FAB  RLX Technology

Good diversification

The 3 months correlation between XFABF and RLX is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology 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 RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of X FAB i.e., X FAB and RLX Technology go up and down completely randomly.

Pair Corralation between X FAB and RLX Technology

Assuming the 90 days horizon X FAB is expected to generate 5.91 times less return on investment than RLX Technology. In addition to that, X FAB is 1.02 times more volatile than RLX Technology. It trades about 0.05 of its total potential returns per unit of risk. RLX Technology is currently generating about 0.32 per unit of volatility. If you would invest  160.00  in RLX Technology on October 7, 2024 and sell it today you would earn a total of  60.00  from holding RLX Technology or generate 37.5% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  RLX Technology

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 latest weak performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

RLX Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLX Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, RLX Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and RLX Technology

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

The idea behind X FAB Silicon Foundries and RLX Technology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.