Correlation Between X-FAB Silicon and Ribbon Communications

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

Diversification Opportunities for X-FAB Silicon and Ribbon Communications

-0.68

Correlation Coefficient

X-FAB Silicon  Ribbon Communications

Excellent diversification

The 3 months correlation between X-FAB and Ribbon is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Ribbon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ribbon Communications and X-FAB Silicon 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 Ribbon Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ribbon Communications has no effect on the direction of X-FAB Silicon i.e., X-FAB Silicon and Ribbon Communications go up and down completely randomly.

Pair Corralation between X-FAB Silicon and Ribbon Communications

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Ribbon Communications. In addition to that, X-FAB Silicon is 1.06 times more volatile than Ribbon Communications. It trades about -0.07 of its total potential returns per unit of risk. Ribbon Communications is currently generating about 0.12 per unit of volatility. If you would invest  300.00  in Ribbon Communications on September 2, 2024 and sell it today you would earn a total of  68.00  from holding Ribbon Communications or generate 22.67% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Ribbon 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 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.

Ribbon Communications

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with X-FAB Silicon and Ribbon Communications

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

The idea behind X FAB Silicon Foundries and Ribbon 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.