Correlation Between X-FAB Silicon and PRECISION DRILLING

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

Diversification Opportunities for X-FAB Silicon and PRECISION DRILLING

0.64

Correlation Coefficient

X-FAB Silicon  PRECISION DRILLING

Poor diversification

The 3 months correlation between X-FAB and PRECISION is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING 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 PRECISION DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRECISION DRILLING has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between X-FAB Silicon and PRECISION DRILLING

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.12 times more return on investment than PRECISION DRILLING. However, X-FAB Silicon is 1.12 times more volatile than PRECISION DRILLING P. It trades about -0.08 of its potential returns per unit of risk. PRECISION DRILLING P is currently generating about -0.17 per unit of risk. If you would invest  488.00  in X FAB Silicon Foundries on December 22, 2024 and sell it today you would lose (67.00) from holding X FAB Silicon Foundries or give up 13.73% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  PRECISION DRILLING P

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.

PRECISION DRILLING

Risk-Adjusted Performance

Very Weak

Over the last 90 days PRECISION DRILLING P 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with X-FAB Silicon and PRECISION DRILLING

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

The idea behind X FAB Silicon Foundries and PRECISION DRILLING P 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.