Correlation Between X FAB and Charter Communications

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

Diversification Opportunities for X FAB and Charter Communications

-0.58

Correlation Coefficient

X FAB  Charter Communications

Excellent diversification

The 3 months correlation between XFB and Charter is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Charter Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charter Communications 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 Charter Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charter Communications has no effect on the direction of X FAB i.e., X FAB and Charter Communications go up and down completely randomly.

Pair Corralation between X FAB and Charter Communications

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Charter Communications. In addition to that, X FAB is 1.14 times more volatile than Charter Communications. It trades about -0.01 of its total potential returns per unit of risk. Charter Communications is currently generating about 0.12 per unit of volatility. If you would invest  28,270  in Charter Communications on September 26, 2024 and sell it today you would earn a total of  5,245  from holding Charter Communications or generate 18.55% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Charter Communications

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Charter Communications

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Charter Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Charter Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with X FAB and Charter Communications

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

The idea behind X FAB Silicon Foundries and Charter Communications 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.