Correlation Between Fabrinet and Littelfuse
Can any of the company-specific risk be diversified away by investing in both Fabrinet and Littelfuse 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 Littelfuse into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabrinet and Littelfuse, you can compare the effects of market volatilities on Fabrinet and Littelfuse 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 Littelfuse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabrinet and Littelfuse.
Diversification Opportunities for Fabrinet and Littelfuse
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fabrinet and Littelfuse is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Littelfuse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Littelfuse 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 Littelfuse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Littelfuse has no effect on the direction of Fabrinet i.e., Fabrinet and Littelfuse go up and down completely randomly.
Pair Corralation between Fabrinet and Littelfuse
Allowing for the 90-day total investment horizon Fabrinet is expected to generate 1.77 times more return on investment than Littelfuse. However, Fabrinet is 1.77 times more volatile than Littelfuse. It trades about 0.05 of its potential returns per unit of risk. Littelfuse is currently generating about 0.02 per unit of risk. If you would invest 12,791 in Fabrinet on August 28, 2024 and sell it today you would earn a total of 10,072 from holding Fabrinet or generate 78.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fabrinet vs. Littelfuse
Performance |
| Timeline |
| Fabrinet |
| Littelfuse |
Fabrinet and Littelfuse Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabrinet and Littelfuse
The main advantage of trading using opposite Fabrinet and Littelfuse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, Littelfuse 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 Littelfuse will offset losses from the drop in Littelfuse's long position.The idea behind Fabrinet and Littelfuse 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.| Littelfuse vs. Plexus Corp | Littelfuse vs. Celestica | Littelfuse vs. Benchmark Electronics | Littelfuse vs. Flex |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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