Correlation Between X FAB and GEAR4MUSIC (HLDGS)

Can any of the company-specific risk be diversified away by investing in both X FAB and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS) 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 and GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS). Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and GEAR4MUSIC (HLDGS).

Diversification Opportunities for X FAB and GEAR4MUSIC (HLDGS)

0.37

Correlation Coefficient

X FAB  GEAR4MUSIC (HLDGS)

Weak diversification

The 3 months correlation between XFB and GEAR4MUSIC is 0.37. 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 (HLDGS) 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 GEAR4MUSIC (HLDGS). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEAR4MUSIC (HLDGS) has no effect on the direction of X FAB i.e., X FAB and GEAR4MUSIC (HLDGS) go up and down completely randomly.

Pair Corralation between X FAB and GEAR4MUSIC (HLDGS)

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.24 times more return on investment than GEAR4MUSIC (HLDGS). However, X FAB is 1.24 times more volatile than GEAR4MUSIC LS 10. It trades about 0.07 of its potential returns per unit of risk. GEAR4MUSIC LS 10 is currently generating about 0.03 per unit of risk. If you would invest  462.00  in X FAB Silicon Foundries on October 11, 2024 and sell it today you would earn a total of  33.00  from holding X FAB Silicon Foundries or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.44%
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 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.

GEAR4MUSIC (HLDGS)

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GEAR4MUSIC LS 10 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GEAR4MUSIC (HLDGS) 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 GEAR4MUSIC (HLDGS)

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

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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.