Correlation Between X FAB and Dana

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

Diversification Opportunities for X FAB and Dana

0.55

Correlation Coefficient

X FAB  Dana

Very weak diversification

The 3 months correlation between XFB and Dana is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Dana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dana Inc 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 Dana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dana Inc has no effect on the direction of X FAB i.e., X FAB and Dana go up and down completely randomly.

Pair Corralation between X FAB and Dana

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Dana. But the stock apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 1.09 times less risky than Dana. The stock trades about -0.08 of its potential returns per unit of risk. The Dana Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,172  in Dana Inc on October 7, 2024 and sell it today you would lose (92.00) from holding Dana Inc or give up 7.85% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  Dana 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. In spite of rather sound fundamental drivers, X FAB is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dana Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Dana reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and Dana

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

The idea behind X FAB Silicon Foundries and Dana 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.