Correlation Between Fabrinet and Vicor

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

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

Diversification Opportunities for Fabrinet and Vicor

0.38

Correlation Coefficient

Fabrinet  Vicor

Weak diversification

The 3 months correlation between Fabrinet and Vicor is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Vicor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicor 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 Vicor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicor has no effect on the direction of Fabrinet i.e., Fabrinet and Vicor go up and down completely randomly.

Pair Corralation between Fabrinet and Vicor

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 4.74 times less return on investment than Vicor. But when comparing it to its historical volatility, Fabrinet is 1.14 times less risky than Vicor. It trades about 0.05 of its potential returns per unit of risk. Vicor is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,573  in Vicor on August 31, 2024 and sell it today you would earn a total of  1,759  from holding Vicor or generate 49.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Fabrinet  vs.  Vicor

Fabrinet

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fabrinet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Fabrinet may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Vicor

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vicor are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, Vicor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fabrinet and Vicor

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

The idea behind Fabrinet and Vicor 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.