Correlation Between X Fab and United States

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

Diversification Opportunities for X Fab and United States

-0.64

Correlation Coefficient

X Fab  United States

Excellent diversification

The 3 months correlation between XFB and United is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding X Fab Silicon and United States Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Steel 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Steel has no effect on the direction of X Fab i.e., X Fab and United States go up and down completely randomly.

Pair Corralation between X Fab and United States

Assuming the 90 days horizon X Fab Silicon is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, X Fab Silicon is 1.22 times less risky than United States. The stock trades about -0.13 of its potential returns per unit of risk. The United States Steel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,391  in United States Steel on August 31, 2024 and sell it today you would earn a total of  411.00  from holding United States Steel or generate 12.12% 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  vs.  United States Steel

X Fab Silicon

Risk-Adjusted Performance

0 of 100

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 December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

United States Steel

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United States reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X Fab and United States

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

The idea behind X Fab Silicon and United States Steel 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.