Correlation Between X-FAB Silicon and Planet Fitness

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

Diversification Opportunities for X-FAB Silicon and Planet Fitness

-0.33

Correlation Coefficient

X-FAB Silicon  Planet Fitness

Very good diversification

The 3 months correlation between X-FAB and Planet is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Planet Fitness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Fitness 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 Planet Fitness. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Fitness has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Planet Fitness go up and down completely randomly.

Pair Corralation between X-FAB Silicon and Planet Fitness

Assuming the 90 days trading horizon X-FAB Silicon is expected to generate 1.64 times less return on investment than Planet Fitness. But when comparing it to its historical volatility, X FAB Silicon Foundries is 1.17 times less risky than Planet Fitness. It trades about 0.18 of its potential returns per unit of risk. Planet Fitness is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  7,250  in Planet Fitness on October 6, 2024 and sell it today you would earn a total of  2,450  from holding Planet Fitness or generate 33.79% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Planet Fitness

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Planet Fitness

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with X-FAB Silicon and Planet Fitness

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

The idea behind X FAB Silicon Foundries and Planet Fitness 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.