Correlation Between Flex and Fabrinet
Can any of the company-specific risk be diversified away by investing in both Flex 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 Flex and Fabrinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flex and Fabrinet, you can compare the effects of market volatilities on Flex 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 Flex with a short position of Fabrinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flex and Fabrinet.
Diversification Opportunities for Flex and Fabrinet
Very weak diversification
The 3 months correlation between Flex and Fabrinet is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Flex and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Flex 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 Flex 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 Flex i.e., Flex and Fabrinet go up and down completely randomly.
Pair Corralation between Flex and Fabrinet
Given the investment horizon of 90 days Flex is expected to generate 0.66 times more return on investment than Fabrinet. However, Flex is 1.51 times less risky than Fabrinet. It trades about 0.28 of its potential returns per unit of risk. Fabrinet is currently generating about -0.05 per unit of risk. If you would invest 3,525 in Flex on August 27, 2024 and sell it today you would earn a total of 582.00 from holding Flex or generate 16.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flex vs. Fabrinet
Performance |
| Timeline |
| Flex |
| Fabrinet |
Flex and Fabrinet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flex and Fabrinet
The main advantage of trading using opposite Flex and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flex 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.The idea behind Flex and Fabrinet 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.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format |