Correlation Between Data Modul and X FAB

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

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

Diversification Opportunities for Data Modul and X FAB

0.26

Correlation Coefficient

Data Modul  X FAB

Modest diversification

The 3 months correlation between Data and XFB is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Data Modul 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 Data Modul 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 Data Modul AG 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 Data Modul i.e., Data Modul and X FAB go up and down completely randomly.

Pair Corralation between Data Modul and X FAB

Assuming the 90 days trading horizon Data Modul AG is expected to under-perform the X FAB. But the stock apears to be less risky and, when comparing its historical volatility, Data Modul AG is 1.19 times less risky than X FAB. The stock trades about -0.07 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  833.00  in X FAB Silicon Foundries on February 8, 2025 and sell it today you would lose (342.00) from holding X FAB Silicon Foundries or give up 41.06% of portfolio value over 90 days.

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

Data Modul AG  vs.  X FAB Silicon Foundries

Data Modul AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Modul AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

X FAB Silicon

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, X FAB may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Data Modul and X FAB

The main advantage of trading using opposite Data Modul and X FAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data Modul 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 Data Modul 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.