Correlation Between X-FAB Silicon and RELIANCE STEEL

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

Diversification Opportunities for X-FAB Silicon and RELIANCE STEEL

0.31

Correlation Coefficient

X-FAB Silicon  RELIANCE STEEL

Weak diversification

The 3 months correlation between X-FAB and RELIANCE is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL 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 RELIANCE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STEEL AL has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and RELIANCE STEEL go up and down completely randomly.

Pair Corralation between X-FAB Silicon and RELIANCE STEEL

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the RELIANCE STEEL. In addition to that, X-FAB Silicon is 2.09 times more volatile than RELIANCE STEEL AL. It trades about -0.06 of its total potential returns per unit of risk. RELIANCE STEEL AL is currently generating about 0.0 per unit of volatility. If you would invest  25,682  in RELIANCE STEEL AL on December 21, 2024 and sell it today you would lose (102.00) from holding RELIANCE STEEL AL or give up 0.4% 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.  RELIANCE STEEL AL

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 latest fragile performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

RELIANCE STEEL AL

Risk-Adjusted Performance

Very Weak

Over the last 90 days RELIANCE STEEL AL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RELIANCE STEEL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with X-FAB Silicon and RELIANCE STEEL

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

The idea behind X FAB Silicon Foundries and RELIANCE STEEL AL 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.