Correlation Between Fabrinet and Allient
Can any of the company-specific risk be diversified away by investing in both Fabrinet and Allient 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 Fabrinet and Allient into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabrinet and Allient, you can compare the effects of market volatilities on Fabrinet and Allient 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 Fabrinet with a short position of Allient. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabrinet and Allient.
Diversification Opportunities for Fabrinet and Allient
Average diversification
The 3 months correlation between Fabrinet and Allient is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient and Fabrinet 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 Fabrinet are associated (or correlated) with Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Fabrinet i.e., Fabrinet and Allient go up and down completely randomly.
Pair Corralation between Fabrinet and Allient
Allowing for the 90-day total investment horizon Fabrinet is expected to under-perform the Allient. In addition to that, Fabrinet is 1.39 times more volatile than Allient. It trades about -0.06 of its total potential returns per unit of risk. Allient is currently generating about 0.55 per unit of volatility. If you would invest 1,733 in Allient on August 23, 2024 and sell it today you would earn a total of 729.00 from holding Allient or generate 42.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fabrinet vs. Allient
Performance |
| Timeline |
| Fabrinet |
| Allient |
Fabrinet and Allient Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabrinet and Allient
The main advantage of trading using opposite Fabrinet and Allient positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, Allient 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 Allient will offset losses from the drop in Allient's long position.The idea behind Fabrinet and Allient 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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