Correlation Between Fabrinet and Synnex
Can any of the company-specific risk be diversified away by investing in both Fabrinet and Synnex 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 Synnex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabrinet and Synnex, you can compare the effects of market volatilities on Fabrinet and Synnex 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 Synnex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabrinet and Synnex.
Diversification Opportunities for Fabrinet and Synnex
Poor diversification
The 3 months correlation between Fabrinet and Synnex is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Synnex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synnex 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 Synnex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synnex has no effect on the direction of Fabrinet i.e., Fabrinet and Synnex go up and down completely randomly.
Pair Corralation between Fabrinet and Synnex
Allowing for the 90-day total investment horizon Fabrinet is expected to under-perform the Synnex. In addition to that, Fabrinet is 2.13 times more volatile than Synnex. It trades about -0.01 of its total potential returns per unit of risk. Synnex is currently generating about 0.0 per unit of volatility. If you would invest 12,187 in Synnex on August 28, 2024 and sell it today you would lose (90.00) from holding Synnex or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fabrinet vs. Synnex
Performance |
| Timeline |
| Fabrinet |
| Synnex |
Fabrinet and Synnex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabrinet and Synnex
The main advantage of trading using opposite Fabrinet and Synnex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, Synnex 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 Synnex will offset losses from the drop in Synnex's long position.The idea behind Fabrinet and Synnex 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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