Correlation Between X-FAB Silicon and Catalent

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

Diversification Opportunities for X-FAB Silicon and Catalent

0.66

Correlation Coefficient

X-FAB Silicon  Catalent

Poor diversification

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

Pair Corralation between X-FAB Silicon and Catalent

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Catalent. In addition to that, X-FAB Silicon is 3.62 times more volatile than Catalent. It trades about -0.05 of its total potential returns per unit of risk. Catalent is currently generating about 0.14 per unit of volatility. If you would invest  5,253  in Catalent on October 8, 2024 and sell it today you would earn a total of  740.00  from holding Catalent or generate 14.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.35%
Values	Daily Returns

X FAB Silicon Foundries  vs.  Catalent

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 comparatively stable basic indicators, X-FAB Silicon is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Catalent

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Catalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, Catalent may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with X-FAB Silicon and Catalent

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

The idea behind X FAB Silicon Foundries and Catalent 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..