Correlation Between X-FAB Silicon and GOODYEAR T

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

Diversification Opportunities for X-FAB Silicon and GOODYEAR T

-0.57

Correlation Coefficient

X-FAB Silicon  GOODYEAR T

Excellent diversification

The 3 months correlation between X-FAB and GOODYEAR is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER 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 GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and GOODYEAR T go up and down completely randomly.

Pair Corralation between X-FAB Silicon and GOODYEAR T

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the GOODYEAR T. In addition to that, X-FAB Silicon is 1.13 times more volatile than GOODYEAR T RUBBER. It trades about -0.06 of its total potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about 0.21 per unit of volatility. If you would invest  712.00  in GOODYEAR T RUBBER on September 5, 2024 and sell it today you would earn a total of  323.00  from holding GOODYEAR T RUBBER or generate 45.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

X FAB Silicon Foundries  vs.  GOODYEAR T RUBBER

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

GOODYEAR T RUBBER

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, GOODYEAR T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X-FAB Silicon and GOODYEAR T

The main advantage of trading using opposite X-FAB Silicon and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X-FAB Silicon position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.

The idea behind X FAB Silicon Foundries and GOODYEAR T RUBBER 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .