Correlation Between X-FAB Silicon and Salesforce

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

Diversification Opportunities for X-FAB Silicon and Salesforce

0.02

Correlation Coefficient

X-FAB Silicon  Salesforce

Significant diversification

The 3 months correlation between X-FAB and Salesforce is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Salesforce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salesforce 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 Salesforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salesforce has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Salesforce go up and down completely randomly.

Pair Corralation between X-FAB Silicon and Salesforce

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Salesforce. In addition to that, X-FAB Silicon is 1.26 times more volatile than Salesforce. It trades about -0.03 of its total potential returns per unit of risk. Salesforce is currently generating about 0.07 per unit of volatility. If you would invest  19,632  in Salesforce on October 24, 2024 and sell it today you would earn a total of  12,293  from holding Salesforce or generate 62.62% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Salesforce

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.

Salesforce

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Salesforce are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Salesforce unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X-FAB Silicon and Salesforce

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

The idea behind X FAB Silicon Foundries and Salesforce 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.