Correlation Between X FAB and STORE ELECTRONIC

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

Diversification Opportunities for X FAB and STORE ELECTRONIC

0.34

Correlation Coefficient

X FAB  STORE ELECTRONIC

Weak diversification

The 3 months correlation between XFB and STORE is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and STORE ELECTRONIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STORE ELECTRONIC 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 STORE ELECTRONIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STORE ELECTRONIC has no effect on the direction of X FAB i.e., X FAB and STORE ELECTRONIC go up and down completely randomly.

Pair Corralation between X FAB and STORE ELECTRONIC

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.57 times more return on investment than STORE ELECTRONIC. However, X FAB is 1.57 times more volatile than STORE ELECTRONIC. It trades about 0.13 of its potential returns per unit of risk. STORE ELECTRONIC is currently generating about -0.06 per unit of risk. If you would invest  462.00  in X FAB Silicon Foundries on September 12, 2024 and sell it today you would earn a total of  38.00  from holding X FAB Silicon Foundries or generate 8.23% return on investment 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.  STORE ELECTRONIC

X FAB Silicon

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

STORE ELECTRONIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STORE ELECTRONIC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with X FAB and STORE ELECTRONIC

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

The idea behind X FAB Silicon Foundries and STORE ELECTRONIC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.