Correlation Between Fabrinet and Research Frontiers
Can any of the company-specific risk be diversified away by investing in both Fabrinet and Research Frontiers 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 Research Frontiers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabrinet and Research Frontiers Incorporated, you can compare the effects of market volatilities on Fabrinet and Research Frontiers 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 Research Frontiers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabrinet and Research Frontiers.
Diversification Opportunities for Fabrinet and Research Frontiers
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Fabrinet and Research is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Research Frontiers Incorporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Research Frontiers 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 Research Frontiers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Research Frontiers has no effect on the direction of Fabrinet i.e., Fabrinet and Research Frontiers go up and down completely randomly.
Pair Corralation between Fabrinet and Research Frontiers
Allowing for the 90-day total investment horizon Fabrinet is expected to generate 1.37 times more return on investment than Research Frontiers. However, Fabrinet is 1.37 times more volatile than Research Frontiers Incorporated. It trades about 0.0 of its potential returns per unit of risk. Research Frontiers Incorporated is currently generating about -0.13 per unit of risk. If you would invest 23,961 in Fabrinet on September 3, 2024 and sell it today you would lose (503.00) from holding Fabrinet or give up 2.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fabrinet vs. Research Frontiers Incorporate
Performance |
| Timeline |
| Fabrinet |
| Research Frontiers |
Fabrinet and Research Frontiers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabrinet and Research Frontiers
The main advantage of trading using opposite Fabrinet and Research Frontiers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, Research Frontiers 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 Research Frontiers will offset losses from the drop in Research Frontiers' long position.The idea behind Fabrinet and Research Frontiers Incorporated 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.| Research Frontiers vs. Richardson Electronics | Research Frontiers vs. Orion Energy Systems | Research Frontiers vs. RF Industries | Research Frontiers vs. Reading International |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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