Correlation Between X FAB and Costco Wholesale

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

Diversification Opportunities for X FAB and Costco Wholesale

0.19

Correlation Coefficient

X FAB  Costco Wholesale

Average diversification

The 3 months correlation between XFB and Costco is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp 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 Foundries are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of X FAB i.e., X FAB and Costco Wholesale go up and down completely randomly.

Pair Corralation between X FAB and Costco Wholesale

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.69 times more return on investment than Costco Wholesale. However, X FAB is 1.69 times more volatile than Costco Wholesale Corp. It trades about -0.03 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about -0.07 per unit of risk. If you would invest  480.00  in X FAB Silicon Foundries on December 22, 2024 and sell it today you would lose (31.00) from holding X FAB Silicon Foundries or give up 6.46% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  Costco Wholesale Corp

X FAB Silicon

Risk-Adjusted Performance

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 is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Costco Wholesale Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Costco Wholesale Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with X FAB and Costco Wholesale

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

The idea behind X FAB Silicon Foundries and Costco Wholesale Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.