Correlation Between X-FAB Silicon and Inchcape Plc

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

Diversification Opportunities for X-FAB Silicon and Inchcape Plc

0.22

Correlation Coefficient

X-FAB Silicon  Inchcape Plc

Modest diversification

The 3 months correlation between X-FAB and Inchcape is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Inchcape plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inchcape plc 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 Inchcape Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inchcape plc has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Inchcape Plc go up and down completely randomly.

Pair Corralation between X-FAB Silicon and Inchcape Plc

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Inchcape Plc. In addition to that, X-FAB Silicon is 1.28 times more volatile than Inchcape plc. It trades about -0.06 of its total potential returns per unit of risk. Inchcape plc is currently generating about -0.05 per unit of volatility. If you would invest  928.00  in Inchcape plc on December 23, 2024 and sell it today you would lose (79.00) from holding Inchcape plc or give up 8.51% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  Inchcape plc

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.

Inchcape plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inchcape plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with X-FAB Silicon and Inchcape Plc

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

The idea behind X FAB Silicon Foundries and Inchcape plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.