Correlation Between Fabrinet and Applied DNA
Can any of the company-specific risk be diversified away by investing in both Fabrinet and Applied DNA 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 Applied DNA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabrinet and Applied DNA Sciences, you can compare the effects of market volatilities on Fabrinet and Applied DNA 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 Applied DNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabrinet and Applied DNA.
Diversification Opportunities for Fabrinet and Applied DNA
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fabrinet and Applied is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Applied DNA Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied DNA Sciences 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 Applied DNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied DNA Sciences has no effect on the direction of Fabrinet i.e., Fabrinet and Applied DNA go up and down completely randomly.
Pair Corralation between Fabrinet and Applied DNA
Allowing for the 90-day total investment horizon Fabrinet is expected to generate 0.3 times more return on investment than Applied DNA. However, Fabrinet is 3.29 times less risky than Applied DNA. It trades about 0.05 of its potential returns per unit of risk. Applied DNA Sciences is currently generating about -0.05 per unit of risk. If you would invest 13,267 in Fabrinet on September 3, 2024 and sell it today you would earn a total of 10,191 from holding Fabrinet or generate 76.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fabrinet vs. Applied DNA Sciences
Performance |
| Timeline |
| Fabrinet |
| Applied DNA Sciences |
Fabrinet and Applied DNA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabrinet and Applied DNA
The main advantage of trading using opposite Fabrinet and Applied DNA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, Applied DNA 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 Applied DNA will offset losses from the drop in Applied DNA's long position.The idea behind Fabrinet and Applied DNA Sciences 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.| Applied DNA vs. Biodesix | Applied DNA vs. DarioHealth Corp | Applied DNA vs. Exagen Inc | Applied DNA vs. Burning Rock Biotech |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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