Correlation Between X FAB and SHIN ETSU

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

Diversification Opportunities for X FAB and SHIN ETSU

0.42

Correlation Coefficient

X FAB  SHIN ETSU

Very weak diversification

The 3 months correlation between XFB and SHIN is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and SHIN ETSU CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIN ETSU CHEMICAL 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 SHIN ETSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIN ETSU CHEMICAL has no effect on the direction of X FAB i.e., X FAB and SHIN ETSU go up and down completely randomly.

Pair Corralation between X FAB and SHIN ETSU

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the SHIN ETSU. In addition to that, X FAB is 1.13 times more volatile than SHIN ETSU CHEMICAL. It trades about -0.04 of its total potential returns per unit of risk. SHIN ETSU CHEMICAL is currently generating about -0.03 per unit of volatility. If you would invest  3,666  in SHIN ETSU CHEMICAL on October 1, 2024 and sell it today you would lose (465.00) from holding SHIN ETSU CHEMICAL or give up 12.68% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  SHIN ETSU CHEMICAL

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.

SHIN ETSU CHEMICAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHIN ETSU CHEMICAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with X FAB and SHIN ETSU

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

The idea behind X FAB Silicon Foundries and SHIN ETSU CHEMICAL 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.