Correlation Between X FAB and Elis SA

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

Diversification Opportunities for X FAB and Elis SA

-0.61

Correlation Coefficient

X FAB  Elis SA

Excellent diversification

The 3 months correlation between XFB and Elis is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Elis SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elis SA 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 Elis SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elis SA has no effect on the direction of X FAB i.e., X FAB and Elis SA go up and down completely randomly.

Pair Corralation between X FAB and Elis SA

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Elis SA. In addition to that, X FAB is 1.44 times more volatile than Elis SA. It trades about -0.05 of its total potential returns per unit of risk. Elis SA is currently generating about 0.13 per unit of volatility. If you would invest  1,873  in Elis SA on December 18, 2024 and sell it today you would earn a total of  269.00  from holding Elis SA or generate 14.36% 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.  Elis SA

X FAB Silicon

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Elis SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elis SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Elis SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and Elis SA

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

The idea behind X FAB Silicon Foundries and Elis SA 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.