Correlation Between J+J SNACK and X FAB

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

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

Diversification Opportunities for J+J SNACK and X FAB

-0.31

Correlation Coefficient

J+J SNACK  X FAB

Very good diversification

The 3 months correlation between J+J and XFB is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding JJ SNACK FOODS 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 J+J SNACK 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 JJ SNACK FOODS are associated (or correlated) with X FAB. 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 J+J SNACK i.e., J+J SNACK and X FAB go up and down completely randomly.

Pair Corralation between J+J SNACK and X FAB

Assuming the 90 days trading horizon J+J SNACK is expected to generate 1.35 times less return on investment than X FAB. But when comparing it to its historical volatility, JJ SNACK FOODS is 2.77 times less risky than X FAB. It trades about 0.01 of its potential returns per unit of risk. X FAB Silicon Foundries is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  508.00  in X FAB Silicon Foundries on September 29, 2024 and sell it today you would lose (7.00) from holding X FAB Silicon Foundries or give up 1.38% of portfolio value over 90 days.

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

JJ SNACK FOODS  vs.  X FAB Silicon Foundries

JJ SNACK FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JJ SNACK FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, J+J SNACK is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the 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 rather sound fundamental drivers, X FAB is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with J+J SNACK and X FAB

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

The idea behind JJ SNACK FOODS 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.