Correlation Between X Fab and Align Technology

Can any of the company-specific risk be diversified away by investing in both X Fab and Align Technology 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 Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between X Fab Silicon and Align Technology, you can compare the effects of market volatilities on X Fab and Align Technology 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 Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of X Fab and Align Technology.

Diversification Opportunities for X Fab and Align Technology

0.61

Correlation Coefficient

X Fab  Align Technology

Poor diversification

The 3 months correlation between XFB and Align is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding X Fab Silicon and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of X Fab i.e., X Fab and Align Technology go up and down completely randomly.

Pair Corralation between X Fab and Align Technology

Assuming the 90 days horizon X Fab Silicon is expected to generate 1.26 times more return on investment than Align Technology. However, X Fab is 1.26 times more volatile than Align Technology. It trades about -0.11 of its potential returns per unit of risk. Align Technology is currently generating about -0.18 per unit of risk. If you would invest  496.00  in X Fab Silicon on December 28, 2024 and sell it today you would lose (96.00) from holding X Fab Silicon or give up 19.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

X Fab Silicon  vs.  Align Technology

X Fab Silicon

Risk-Adjusted Performance

Very Weak

Over the last 90 days X Fab Silicon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Align Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Align Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with X Fab and Align Technology

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

The idea behind X Fab Silicon and Align Technology 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.