Correlation Between X FAB and INTER CARS

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

Diversification Opportunities for X FAB and INTER CARS

0.7

Correlation Coefficient

X FAB  INTER CARS

Poor diversification

The 3 months correlation between XFB and INTER is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS 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 INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of X FAB i.e., X FAB and INTER CARS go up and down completely randomly.

Pair Corralation between X FAB and INTER CARS

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.56 times more return on investment than INTER CARS. However, X FAB is 1.56 times more volatile than INTER CARS SA. It trades about 0.18 of its potential returns per unit of risk. INTER CARS SA is currently generating about 0.21 per unit of risk. If you would invest  426.00  in X FAB Silicon Foundries on September 23, 2024 and sell it today you would earn a total of  50.00  from holding X FAB Silicon Foundries or generate 11.74% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  INTER CARS SA

X FAB Silicon

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, X FAB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

INTER CARS SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INTER CARS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with X FAB and INTER CARS

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

The idea behind X FAB Silicon Foundries and INTER CARS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.