Correlation Between X FAB and Antofagasta Plc

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

Diversification Opportunities for X FAB and Antofagasta Plc

0.28

Correlation Coefficient

X FAB  Antofagasta Plc

Modest diversification

The 3 months correlation between XFB and Antofagasta is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Antofagasta plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta plc 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 Antofagasta Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta plc has no effect on the direction of X FAB i.e., X FAB and Antofagasta Plc go up and down completely randomly.

Pair Corralation between X FAB and Antofagasta Plc

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Antofagasta Plc. In addition to that, X FAB is 1.25 times more volatile than Antofagasta plc. It trades about -0.06 of its total potential returns per unit of risk. Antofagasta plc is currently generating about -0.08 per unit of volatility. If you would invest  2,553  in Antofagasta plc on October 8, 2024 and sell it today you would lose (585.00) from holding Antofagasta plc or give up 22.91% 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.  Antofagasta plc

X FAB Silicon

Risk-Adjusted Performance

0 of 100

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 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.

Antofagasta plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with X FAB and Antofagasta Plc

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

The idea behind X FAB Silicon Foundries and Antofagasta plc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.