Correlation Between Fabrinet and FIT Hon

Can any of the company-specific risk be diversified away by investing in both Fabrinet and FIT Hon 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 FIT Hon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fabrinet and FIT Hon Teng, you can compare the effects of market volatilities on Fabrinet and FIT Hon 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 FIT Hon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabrinet and FIT Hon.

Diversification Opportunities for Fabrinet and FIT Hon

0.03

Correlation Coefficient

Fabrinet  FIT Hon

Significant diversification

The 3 months correlation between Fabrinet and FIT is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and FIT Hon Teng in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIT Hon Teng 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 FIT Hon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIT Hon Teng has no effect on the direction of Fabrinet i.e., Fabrinet and FIT Hon go up and down completely randomly.

Pair Corralation between Fabrinet and FIT Hon

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 0.72 times more return on investment than FIT Hon. However, Fabrinet is 1.39 times less risky than FIT Hon. It trades about 0.0 of its potential returns per unit of risk. FIT Hon Teng is currently generating about -0.08 per unit of risk. If you would invest  22,630  in Fabrinet on September 21, 2024 and sell it today you would lose (173.00) from holding Fabrinet or give up 0.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Fabrinet  vs.  FIT Hon Teng

Fabrinet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fabrinet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Fabrinet is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

FIT Hon Teng

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FIT Hon Teng are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, FIT Hon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fabrinet and FIT Hon

The main advantage of trading using opposite Fabrinet and FIT Hon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, FIT Hon 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 FIT Hon will offset losses from the drop in FIT Hon's long position.

The idea behind Fabrinet and FIT Hon Teng 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.