Correlation Between X-FAB Silicon and NVR

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

Diversification Opportunities for X-FAB Silicon and NVR

0.54

Correlation Coefficient

X-FAB Silicon  NVR

Very weak diversification

The 3 months correlation between X-FAB and NVR is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and NVR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVR Inc 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 NVR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVR Inc has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and NVR go up and down completely randomly.

Pair Corralation between X-FAB Silicon and NVR

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.71 times more return on investment than NVR. However, X-FAB Silicon is 1.71 times more volatile than NVR Inc. It trades about -0.01 of its potential returns per unit of risk. NVR Inc is currently generating about -0.18 per unit of risk. If you would invest  470.00  in X FAB Silicon Foundries on December 20, 2024 and sell it today you would lose (19.00) from holding X FAB Silicon Foundries or give up 4.04% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  NVR Inc

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 Silicon is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

NVR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NVR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 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 NVR

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

The idea behind X FAB Silicon Foundries and NVR Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.