Correlation Between X FAB and WIMFARM SA

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

Diversification Opportunities for X FAB and WIMFARM SA

0.53

Correlation Coefficient

X FAB  WIMFARM SA

Very weak diversification

The 3 months correlation between XFB and WIMFARM is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO 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 WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of X FAB i.e., X FAB and WIMFARM SA go up and down completely randomly.

Pair Corralation between X FAB and WIMFARM SA

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 0.96 times more return on investment than WIMFARM SA. However, X FAB Silicon Foundries is 1.04 times less risky than WIMFARM SA. It trades about 0.22 of its potential returns per unit of risk. WIMFARM SA EO is currently generating about 0.12 per unit of risk. If you would invest  437.00  in X FAB Silicon Foundries on September 16, 2024 and sell it today you would earn a total of  60.00  from holding X FAB Silicon Foundries or generate 13.73% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  WIMFARM SA EO

X FAB Silicon

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with X FAB and WIMFARM SA

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

The idea behind X FAB Silicon Foundries and WIMFARM SA EO 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..