Correlation Between X-FAB Silicon and Global Fashion

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

Diversification Opportunities for X-FAB Silicon and Global Fashion

-0.68

Correlation Coefficient

X-FAB Silicon  Global Fashion

Excellent diversification

The 3 months correlation between X-FAB and Global is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Global Fashion Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Fashion Group 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 Global Fashion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Fashion Group has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Global Fashion go up and down completely randomly.

Pair Corralation between X-FAB Silicon and Global Fashion

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Global Fashion. But the stock apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 1.75 times less risky than Global Fashion. The stock trades about -0.06 of its potential returns per unit of risk. The Global Fashion Group is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Global Fashion Group on December 23, 2024 and sell it today you would earn a total of  10.00  from holding Global Fashion Group or generate 45.45% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Global Fashion Group

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 latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Global Fashion Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Fashion Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Global Fashion unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X-FAB Silicon and Global Fashion

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

The idea behind X FAB Silicon Foundries and Global Fashion Group 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.