Correlation Between Apple and Fabrinet

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Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Fabrinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Fabrinet, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Fabrinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Fabrinet.

Diversification Opportunities for Apple and Fabrinet

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Apple and Fabrinet is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Apple 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 Apple Inc 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 Apple i.e., Apple and Fabrinet go up and down completely randomly.

Pair Corralation between Apple and Fabrinet

Given the investment horizon of 90 days Apple Inc is expected to under-perform the Fabrinet. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 2.09 times less risky than Fabrinet. The stock trades about -0.15 of its potential returns per unit of risk. The Fabrinet is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  20,239  in Fabrinet on December 29, 2023 and sell it today you would lose (1,102) from holding Fabrinet or give up 5.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Apple Inc  vs.  Fabrinet

 Performance 
       Timeline  
Apple Inc 

Risk-Adjusted Performance

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High
Very Weak
Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
Fabrinet 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Fabrinet are ranked lower than 1 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Apple and Fabrinet Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Fabrinet

The main advantage of trading using opposite Apple and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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