Correlation Between GoPro and Fabrinet
Can any of the company-specific risk be diversified away by investing in both GoPro 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 GoPro and Fabrinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GoPro Inc and Fabrinet, you can compare the effects of market volatilities on GoPro 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 GoPro with a short position of Fabrinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of GoPro and Fabrinet.
Diversification Opportunities for GoPro and Fabrinet
Very weak diversification
The 3 months correlation between GoPro and Fabrinet is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding GoPro Inc and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and GoPro 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 GoPro 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 GoPro i.e., GoPro and Fabrinet go up and down completely randomly.
Pair Corralation between GoPro and Fabrinet
Given the investment horizon of 90 days GoPro Inc is expected to under-perform the Fabrinet. But the stock apears to be less risky and, when comparing its historical volatility, GoPro Inc is 1.07 times less risky than Fabrinet. The stock trades about -0.73 of its potential returns per unit of risk. The Fabrinet is currently generating about -0.34 of returns per unit of risk over similar time horizon. If you would invest 19,208 in Fabrinet on January 24, 2024 and sell it today you would lose (2,791) from holding Fabrinet or give up 14.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
GoPro Inc vs. Fabrinet
Performance |
| Timeline |
| GoPro Inc |
| Fabrinet |
GoPro and Fabrinet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GoPro and Fabrinet
The main advantage of trading using opposite GoPro and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GoPro 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.| GoPro vs. Brunswick | GoPro vs. Ralph Lauren Corp | GoPro vs. Under Armour C | GoPro vs. Dogness International Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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