Correlation Between X FAB and BANK OCHINA

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

Diversification Opportunities for X FAB and BANK OCHINA

-0.66

Correlation Coefficient

X FAB  BANK OCHINA

Excellent diversification

The 3 months correlation between XFB and BANK is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and BANK OCHINA H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OCHINA H 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 BANK OCHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OCHINA H has no effect on the direction of X FAB i.e., X FAB and BANK OCHINA go up and down completely randomly.

Pair Corralation between X FAB and BANK OCHINA

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the BANK OCHINA. In addition to that, X FAB is 1.39 times more volatile than BANK OCHINA H. It trades about -0.14 of its total potential returns per unit of risk. BANK OCHINA H is currently generating about 0.16 per unit of volatility. If you would invest  1,138  in BANK OCHINA H on December 29, 2024 and sell it today you would earn a total of  222.00  from holding BANK OCHINA H or generate 19.51% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  BANK OCHINA H

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 uncertain 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.

BANK OCHINA H

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BANK OCHINA H are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BANK OCHINA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and BANK OCHINA

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

The idea behind X FAB Silicon Foundries and BANK OCHINA H 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.