Correlation Between X FAB and SPORTING

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

Diversification Opportunities for X FAB and SPORTING

-0.22

Correlation Coefficient

X FAB  SPORTING

Very good diversification

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

Pair Corralation between X FAB and SPORTING

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the SPORTING. But the stock apears to be less risky and, when comparing its historical volatility, X FAB Silicon Foundries is 1.27 times less risky than SPORTING. The stock trades about -0.03 of its potential returns per unit of risk. The SPORTING is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  102.00  in SPORTING on December 22, 2024 and sell it today you would lose (6.00) from holding SPORTING or give up 5.88% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  SPORTING

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

SPORTING

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPORTING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, SPORTING is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with X FAB and SPORTING

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

The idea behind X FAB Silicon Foundries and SPORTING 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.