Correlation Between X-FAB Silicon and North American

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

Diversification Opportunities for X-FAB Silicon and North American

-0.5

Correlation Coefficient

X-FAB Silicon  North American

Very good diversification

The 3 months correlation between X-FAB and North is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and North American go up and down completely randomly.

Pair Corralation between X-FAB Silicon and North American

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the North American. In addition to that, X-FAB Silicon is 1.21 times more volatile than North American Construction. It trades about -0.06 of its total potential returns per unit of risk. North American Construction is currently generating about 0.03 per unit of volatility. If you would invest  1,729  in North American Construction on September 3, 2024 and sell it today you would earn a total of  51.00  from holding North American Construction or generate 2.95% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  North American Construction

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.

North American Const

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, North American 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 Silicon and North American

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

The idea behind X FAB Silicon Foundries and North American Construction 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.