Correlation Between Chia and Fabrinet
Can any of the company-specific risk be diversified away by investing in both Chia 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 Chia and Fabrinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chia and Fabrinet, you can compare the effects of market volatilities on Chia 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 Chia with a short position of Fabrinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chia and Fabrinet.
Diversification Opportunities for Chia and Fabrinet
Very good diversification
The 3 months correlation between Chia and Fabrinet is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Chia and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Chia 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 Chia 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 Chia i.e., Chia and Fabrinet go up and down completely randomly.
Pair Corralation between Chia and Fabrinet
Assuming the 90 days trading horizon Chia is expected to generate 3.4 times more return on investment than Fabrinet. However, Chia is 3.4 times more volatile than Fabrinet. It trades about 0.1 of its potential returns per unit of risk. Fabrinet is currently generating about 0.22 per unit of risk. If you would invest 2,168 in Chia on October 20, 2024 and sell it today you would earn a total of 217.00 from holding Chia or generate 10.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 90.91% |
| Values | Daily Returns |
Chia vs. Fabrinet
Performance |
| Timeline |
| Chia |
| Fabrinet |
Chia and Fabrinet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chia and Fabrinet
The main advantage of trading using opposite Chia and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chia 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.The idea behind Chia and Fabrinet 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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