Correlation Between X FAB and SEKISUI CHEMICAL

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

Diversification Opportunities for X FAB and SEKISUI CHEMICAL

-0.19

Correlation Coefficient

X FAB  SEKISUI CHEMICAL

Good diversification

The 3 months correlation between XFB and SEKISUI is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and SEKISUI CHEMICAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEKISUI 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 SEKISUI CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEKISUI CHEMICAL has no effect on the direction of X FAB i.e., X FAB and SEKISUI CHEMICAL go up and down completely randomly.

Pair Corralation between X FAB and SEKISUI CHEMICAL

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the SEKISUI CHEMICAL. In addition to that, X FAB is 1.8 times more volatile than SEKISUI CHEMICAL. It trades about -0.04 of its total potential returns per unit of risk. SEKISUI CHEMICAL is currently generating about 0.07 per unit of volatility. If you would invest  1,280  in SEKISUI CHEMICAL on September 26, 2024 and sell it today you would earn a total of  190.00  from holding SEKISUI CHEMICAL or generate 14.84% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  SEKISUI CHEMICAL

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Insignificant

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.

SEKISUI CHEMICAL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SEKISUI CHEMICAL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, SEKISUI CHEMICAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with X FAB and SEKISUI CHEMICAL

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

The idea behind X FAB Silicon Foundries and SEKISUI 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.