Correlation Between X-FAB Silicon and Evolution

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

Diversification Opportunities for X-FAB Silicon and Evolution

0.34

Correlation Coefficient

X-FAB Silicon  Evolution

Weak diversification

The 3 months correlation between X-FAB and Evolution is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution AB and X-FAB Silicon 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 Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution AB has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Evolution go up and down completely randomly.

Pair Corralation between X-FAB Silicon and Evolution

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Evolution. In addition to that, X-FAB Silicon is 1.24 times more volatile than Evolution AB. It trades about -0.08 of its total potential returns per unit of risk. Evolution AB is currently generating about 0.0 per unit of volatility. If you would invest  7,368  in Evolution AB on December 22, 2024 and sell it today you would lose (146.00) from holding Evolution AB or give up 1.98% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  Evolution AB

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 fragile 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.

Evolution AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Evolution 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 Silicon and Evolution

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

The idea behind X FAB Silicon Foundries and Evolution AB 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.