Correlation Between X-FAB Silicon and AeroVironment

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

Diversification Opportunities for X-FAB Silicon and AeroVironment

-0.27

Correlation Coefficient

X-FAB Silicon  AeroVironment

Very good diversification

The 3 months correlation between X-FAB and AeroVironment is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and AeroVironment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AeroVironment 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 AeroVironment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AeroVironment has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and AeroVironment go up and down completely randomly.

Pair Corralation between X-FAB Silicon and AeroVironment

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the AeroVironment. But the stock apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 1.38 times less risky than AeroVironment. The stock trades about -0.05 of its potential returns per unit of risk. The AeroVironment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13,790  in AeroVironment on October 12, 2024 and sell it today you would earn a total of  2,000  from holding AeroVironment or generate 14.5% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  AeroVironment

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

AeroVironment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AeroVironment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with X-FAB Silicon and AeroVironment

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

The idea behind X FAB Silicon Foundries and AeroVironment 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.