Correlation Between X FAB and H M

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

Diversification Opportunities for X FAB and H M

0.16

Correlation Coefficient

X FAB  H M

Average diversification

The 3 months correlation between XFB and HMSB is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and H M Hennes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H M Hennes 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 H M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H M Hennes has no effect on the direction of X FAB i.e., X FAB and H M go up and down completely randomly.

Pair Corralation between X FAB and H M

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.52 times more return on investment than H M. However, X FAB is 1.52 times more volatile than H M Hennes. It trades about -0.02 of its potential returns per unit of risk. H M Hennes is currently generating about -0.03 per unit of risk. If you would invest  480.00  in X FAB Silicon Foundries on December 21, 2024 and sell it today you would lose (25.00) from holding X FAB Silicon Foundries or give up 5.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

X FAB Silicon Foundries  vs.  H M Hennes

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.

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H M is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with X FAB and H M

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

The idea behind X FAB Silicon Foundries and H M Hennes 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.