Correlation Between Iteris and Fabrinet

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

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

Diversification Opportunities for Iteris and Fabrinet

0.69

Correlation Coefficient

Iteris  Fabrinet

Poor diversification

The 3 months correlation between Iteris and Fabrinet is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Iteris Inc and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Iteris 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 Iteris 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 Iteris i.e., Iteris and Fabrinet go up and down completely randomly.

Pair Corralation between Iteris and Fabrinet

Considering the 90-day investment horizon Iteris Inc is expected to under-perform the Fabrinet. But the stock apears to be less risky and, when comparing its historical volatility, Iteris Inc is 1.36 times less risky than Fabrinet. The stock trades about -0.07 of its potential returns per unit of risk. The Fabrinet is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  19,233  in Fabrinet on February 7, 2024 and sell it today you would lose (350.00) from holding Fabrinet or give up 1.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Iteris Inc  vs.  Fabrinet

Iteris Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iteris Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Iteris and Fabrinet

The main advantage of trading using opposite Iteris and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iteris 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 Iteris 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.