Correlation Between X-FAB Silicon and GEAR4MUSIC

Can any of the company-specific risk be diversified away by investing in both X-FAB Silicon and GEAR4MUSIC 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 GEAR4MUSIC 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 GEAR4MUSIC LS 10, you can compare the effects of market volatilities on X-FAB Silicon and GEAR4MUSIC 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 GEAR4MUSIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of X-FAB Silicon and GEAR4MUSIC.

Diversification Opportunities for X-FAB Silicon and GEAR4MUSIC

0.54

Correlation Coefficient

X-FAB Silicon  GEAR4MUSIC

Very weak diversification

The 3 months correlation between X-FAB and GEAR4MUSIC is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and GEAR4MUSIC LS 10 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEAR4MUSIC LS 10 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 GEAR4MUSIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC LS 10 has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and GEAR4MUSIC go up and down completely randomly.

Pair Corralation between X-FAB Silicon and GEAR4MUSIC

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the GEAR4MUSIC. In addition to that, X-FAB Silicon is 1.52 times more volatile than GEAR4MUSIC LS 10. It trades about -0.08 of its total potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about -0.11 per unit of volatility. If you would invest  228.00  in GEAR4MUSIC LS 10 on September 1, 2024 and sell it today you would lose (33.00) from holding GEAR4MUSIC LS 10 or give up 14.47% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  GEAR4MUSIC LS 10

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 uncertain performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

GEAR4MUSIC LS 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with X-FAB Silicon and GEAR4MUSIC

The main advantage of trading using opposite X-FAB Silicon and GEAR4MUSIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X-FAB Silicon position performs unexpectedly, GEAR4MUSIC 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 GEAR4MUSIC will offset losses from the drop in GEAR4MUSIC's long position.

The idea behind X FAB Silicon Foundries and GEAR4MUSIC LS 10 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.

Check out your portfolio center.

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.