Correlation Between Fabrinet and SigmaTron International
Can any of the company-specific risk be diversified away by investing in both Fabrinet and SigmaTron International 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 SigmaTron International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabrinet and SigmaTron International, you can compare the effects of market volatilities on Fabrinet and SigmaTron International 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 SigmaTron International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabrinet and SigmaTron International.
Diversification Opportunities for Fabrinet and SigmaTron International
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fabrinet and SigmaTron is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and SigmaTron International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SigmaTron International 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 SigmaTron International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SigmaTron International has no effect on the direction of Fabrinet i.e., Fabrinet and SigmaTron International go up and down completely randomly.
Pair Corralation between Fabrinet and SigmaTron International
Allowing for the 90-day total investment horizon Fabrinet is expected to under-perform the SigmaTron International. In addition to that, Fabrinet is 1.36 times more volatile than SigmaTron International. It trades about -0.01 of its total potential returns per unit of risk. SigmaTron International is currently generating about 0.08 per unit of volatility. If you would invest 269.00 in SigmaTron International on September 1, 2024 and sell it today you would earn a total of 11.00 from holding SigmaTron International or generate 4.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fabrinet vs. SigmaTron International
Performance |
| Timeline |
| Fabrinet |
| SigmaTron International |
Fabrinet and SigmaTron International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabrinet and SigmaTron International
The main advantage of trading using opposite Fabrinet and SigmaTron International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, SigmaTron International 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 SigmaTron International will offset losses from the drop in SigmaTron International's long position.The idea behind Fabrinet and SigmaTron International 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.| SigmaTron International vs. Desktop Metal | SigmaTron International vs. Fabrinet | SigmaTron International vs. Knowles Cor | SigmaTron International vs. Ubiquiti Networks |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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