Correlation Between X FAB and Hologic

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

Diversification Opportunities for X FAB and Hologic

-0.66

Correlation Coefficient

X FAB  Hologic

Excellent diversification

The 3 months correlation between XFB and Hologic is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Hologic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hologic 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 Hologic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hologic has no effect on the direction of X FAB i.e., X FAB and Hologic go up and down completely randomly.

Pair Corralation between X FAB and Hologic

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Hologic. In addition to that, X FAB is 2.25 times more volatile than Hologic. It trades about -0.03 of its total potential returns per unit of risk. Hologic is currently generating about -0.02 per unit of volatility. If you would invest  7,774  in Hologic on October 26, 2024 and sell it today you would lose (1,074) from holding Hologic or give up 13.82% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  Hologic

X FAB Silicon

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, X FAB may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hologic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hologic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with X FAB and Hologic

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

The idea behind X FAB Silicon Foundries and Hologic 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.