Correlation Between Universal Display and Fabrinet
Can any of the company-specific risk be diversified away by investing in both Universal Display and Fabrinet 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 Universal Display and Fabrinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Display and Fabrinet, you can compare the effects of market volatilities on Universal Display and Fabrinet 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 Universal Display with a short position of Fabrinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Display and Fabrinet.
Diversification Opportunities for Universal Display and Fabrinet
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Universal and Fabrinet is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Universal Display and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Universal Display 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 Universal Display are associated (or correlated) with Fabrinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabrinet has no effect on the direction of Universal Display i.e., Universal Display and Fabrinet go up and down completely randomly.
Pair Corralation between Universal Display and Fabrinet
Given the investment horizon of 90 days Universal Display is expected to under-perform the Fabrinet. But the stock apears to be less risky and, when comparing its historical volatility, Universal Display is 1.41 times less risky than Fabrinet. The stock trades about -0.1 of its potential returns per unit of risk. The Fabrinet is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 24,365 in Fabrinet on August 30, 2024 and sell it today you would lose (1,780) from holding Fabrinet or give up 7.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Display vs. Fabrinet
Performance |
| Timeline |
| Universal Display |
| Fabrinet |
Universal Display and Fabrinet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Display and Fabrinet
The main advantage of trading using opposite Universal Display and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Display position performs unexpectedly, Fabrinet 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 Fabrinet will offset losses from the drop in Fabrinet's long position.| Universal Display vs. Plexus Corp | Universal Display vs. Methode Electronics | Universal Display vs. Benchmark Electronics | Universal Display vs. Bel Fuse A |
| Fabrinet vs. Sanmina | Fabrinet vs. Benchmark Electronics | Fabrinet vs. Methode Electronics | Fabrinet vs. Celestica |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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