Correlation Between X FAB and John Wood

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

Diversification Opportunities for X FAB and John Wood

0.66

Correlation Coefficient

X FAB  John Wood

Poor diversification

The 3 months correlation between 0ROZ and John is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and John Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Wood Group 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 John Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Wood Group has no effect on the direction of X FAB i.e., X FAB and John Wood go up and down completely randomly.

Pair Corralation between X FAB and John Wood

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 0.38 times more return on investment than John Wood. However, X FAB Silicon Foundries is 2.66 times less risky than John Wood. It trades about -0.07 of its potential returns per unit of risk. John Wood Group is currently generating about -0.09 per unit of risk. If you would invest  523.00  in X FAB Silicon Foundries on September 3, 2024 and sell it today you would lose (85.00) from holding X FAB Silicon Foundries or give up 16.25% of portfolio value over 90 days.

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

X FAB Silicon Foundries  vs.  John Wood Group

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.

John Wood Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days John Wood Group 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with X FAB and John Wood

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

The idea behind X FAB Silicon Foundries and John Wood Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.