Correlation Between X FAB and SWISS WATER

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

Diversification Opportunities for X FAB and SWISS WATER

0.65

Correlation Coefficient

X FAB  SWISS WATER

Poor diversification

The 3 months correlation between XFB and SWISS is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE 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 SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of X FAB i.e., X FAB and SWISS WATER go up and down completely randomly.

Pair Corralation between X FAB and SWISS WATER

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the SWISS WATER. But the stock apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 1.15 times less risky than SWISS WATER. The stock trades about -0.14 of its potential returns per unit of risk. The SWISS WATER DECAFFCOFFEE is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  260.00  in SWISS WATER DECAFFCOFFEE on December 29, 2024 and sell it today you would lose (50.00) from holding SWISS WATER DECAFFCOFFEE or give up 19.23% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  SWISS WATER DECAFFCOFFEE

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 uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

Very Weak

Over the last 90 days SWISS WATER DECAFFCOFFEE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with X FAB and SWISS WATER

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

The idea behind X FAB Silicon Foundries and SWISS WATER DECAFFCOFFEE 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.