Correlation Between Highlight Communications and X-FAB Silicon

Can any of the company-specific risk be diversified away by investing in both Highlight Communications and X-FAB Silicon 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 Highlight Communications and X-FAB Silicon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highlight Communications AG and X FAB Silicon Foundries, you can compare the effects of market volatilities on Highlight Communications and X-FAB Silicon 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 Highlight Communications with a short position of X-FAB Silicon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and X-FAB Silicon.

Diversification Opportunities for Highlight Communications and X-FAB Silicon

0.26

Correlation Coefficient

Highlight Communications  X-FAB Silicon

Modest diversification

The 3 months correlation between Highlight and X-FAB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with X-FAB Silicon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of Highlight Communications i.e., Highlight Communications and X-FAB Silicon go up and down completely randomly.

Pair Corralation between Highlight Communications and X-FAB Silicon

Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the X-FAB Silicon. In addition to that, Highlight Communications is 1.32 times more volatile than X FAB Silicon Foundries. It trades about -0.08 of its total potential returns per unit of risk. X FAB Silicon Foundries is currently generating about -0.07 per unit of volatility. If you would invest  540.00  in X FAB Silicon Foundries on September 2, 2024 and sell it today you would lose (90.00) from holding X FAB Silicon Foundries or give up 16.67% of portfolio value over 90 days.

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

Highlight Communications AG  vs.  X FAB Silicon Foundries

Highlight Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highlight Communications AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental 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.

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 fundamental drivers 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 Highlight Communications and X-FAB Silicon

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

The idea behind Highlight Communications AG and X FAB Silicon Foundries 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.