Correlation Between X FAB and Scandic Hotels

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

Diversification Opportunities for X FAB and Scandic Hotels

0.45

Correlation Coefficient

X FAB  Scandic Hotels

Very weak diversification

The 3 months correlation between XFB and Scandic is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of X FAB i.e., X FAB and Scandic Hotels go up and down completely randomly.

Pair Corralation between X FAB and Scandic Hotels

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.04 times more return on investment than Scandic Hotels. However, X FAB is 1.04 times more volatile than Scandic Hotels Group. It trades about 0.25 of its potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.11 per unit of risk. If you would invest  518.00  in X FAB Silicon Foundries on March 25, 2025 and sell it today you would earn a total of  64.00  from holding X FAB Silicon Foundries or generate 12.36% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Scandic Hotels Group

X FAB Silicon

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, X FAB exhibited solid returns over the last few months and may actually be approaching a breakup point.

Scandic Hotels Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scandic Hotels Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Scandic Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with X FAB and Scandic Hotels

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

The idea behind X FAB Silicon Foundries and Scandic Hotels Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.