Correlation Between Dow Jones and Fabrinet
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Fabrinet 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 Dow Jones and Fabrinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Fabrinet, you can compare the effects of market volatilities on Dow Jones and Fabrinet 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 Dow Jones with a short position of Fabrinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Fabrinet.
Diversification Opportunities for Dow Jones and Fabrinet
Weak diversification
The 3 months correlation between Dow and Fabrinet is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Fabrinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabrinet has no effect on the direction of Dow Jones i.e., Dow Jones and Fabrinet go up and down completely randomly.
Pair Corralation between Dow Jones and Fabrinet
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.2 times more return on investment than Fabrinet. However, Dow Jones Industrial is 5.01 times less risky than Fabrinet. It trades about 0.12 of its potential returns per unit of risk. Fabrinet is currently generating about -0.03 per unit of risk. If you would invest 4,205,219 in Dow Jones Industrial on November 1, 2024 and sell it today you would earn a total of 266,133 from holding Dow Jones Industrial or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Fabrinet
Performance |
| Timeline |
Dow Jones and Fabrinet Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Fabrinet
Pair trading matchups for Fabrinet
Pair Trading with Dow Jones and Fabrinet
The main advantage of trading using opposite Dow Jones and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Fabrinet 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 Fabrinet will offset losses from the drop in Fabrinet's long position.| Dow Jones vs. Boston Properties | Dow Jones vs. Suntory Beverage Food | Dow Jones vs. Envista Holdings Corp | Dow Jones vs. Fevertree Drinks Plc |
Check out your portfolio center.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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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