Correlation Between Fabrinet and Sanmina

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

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

Diversification Opportunities for Fabrinet and Sanmina

0.07

Correlation Coefficient

Fabrinet  Sanmina

Significant diversification

The 3 months correlation between Fabrinet and Sanmina is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Sanmina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanmina 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 Sanmina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanmina has no effect on the direction of Fabrinet i.e., Fabrinet and Sanmina go up and down completely randomly.

Pair Corralation between Fabrinet and Sanmina

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 2.76 times less return on investment than Sanmina. In addition to that, Fabrinet is 1.56 times more volatile than Sanmina. It trades about 0.03 of its total potential returns per unit of risk. Sanmina is currently generating about 0.13 per unit of volatility. If you would invest  6,850  in Sanmina on September 17, 2024 and sell it today you would earn a total of  1,173  from holding Sanmina or generate 17.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fabrinet  vs.  Sanmina

Fabrinet

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fabrinet are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Fabrinet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Sanmina

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sanmina are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Sanmina displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fabrinet and Sanmina

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

The idea behind Fabrinet and Sanmina 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.