Correlation Between X-FAB Silicon and Anglo American

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

Diversification Opportunities for X-FAB Silicon and Anglo American

0.49

Correlation Coefficient

X-FAB Silicon  Anglo American

Very weak diversification

The 3 months correlation between X-FAB and Anglo is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Anglo American plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American plc has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Anglo American go up and down completely randomly.

Pair Corralation between X-FAB Silicon and Anglo American

Assuming the 90 days trading horizon X-FAB Silicon is expected to generate 8.87 times less return on investment than Anglo American. In addition to that, X-FAB Silicon is 1.43 times more volatile than Anglo American plc. It trades about 0.01 of its total potential returns per unit of risk. Anglo American plc is currently generating about 0.1 per unit of volatility. If you would invest  2,762  in Anglo American plc on October 23, 2024 and sell it today you would earn a total of  327.00  from holding Anglo American plc or generate 11.84% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Anglo American plc

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

Anglo American plc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Anglo American exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X-FAB Silicon and Anglo American

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

The idea behind X FAB Silicon Foundries and Anglo American 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.