Correlation Between X-FAB Silicon and TRAINLINE PLC

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

Diversification Opportunities for X-FAB Silicon and TRAINLINE PLC

-0.5

Correlation Coefficient

X-FAB Silicon  TRAINLINE PLC

Very good diversification

The 3 months correlation between X-FAB and TRAINLINE is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and TRAINLINE PLC LS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAINLINE PLC LS 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 TRAINLINE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAINLINE PLC LS has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and TRAINLINE PLC go up and down completely randomly.

Pair Corralation between X-FAB Silicon and TRAINLINE PLC

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 0.84 times more return on investment than TRAINLINE PLC. However, X FAB Silicon Foundries is 1.19 times less risky than TRAINLINE PLC. It trades about -0.04 of its potential returns per unit of risk. TRAINLINE PLC LS is currently generating about -0.14 per unit of risk. If you would invest  501.00  in X FAB Silicon Foundries on October 9, 2024 and sell it today you would lose (6.00) from holding X FAB Silicon Foundries or give up 1.2% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  TRAINLINE PLC LS

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.

TRAINLINE PLC LS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAINLINE PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X-FAB Silicon and TRAINLINE PLC

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

The idea behind X FAB Silicon Foundries and TRAINLINE PLC LS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.