Correlation Between OSI Systems and Fabrinet

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

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

Diversification Opportunities for OSI Systems and Fabrinet

0.19

Correlation Coefficient

OSI Systems  Fabrinet

Average diversification

The 3 months correlation between OSI and Fabrinet is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding OSI Systems and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and OSI Systems 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 OSI Systems 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 OSI Systems i.e., OSI Systems and Fabrinet go up and down completely randomly.

Pair Corralation between OSI Systems and Fabrinet

Given the investment horizon of 90 days OSI Systems is expected to generate 1.22 times less return on investment than Fabrinet. But when comparing it to its historical volatility, OSI Systems is 1.58 times less risky than Fabrinet. It trades about 0.06 of its potential returns per unit of risk. Fabrinet is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  22,036  in Fabrinet on March 7, 2024 and sell it today you would earn a total of  1,290  from holding Fabrinet or generate 5.85% return on investment over 90 days.

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

OSI Systems  vs.  Fabrinet

OSI Systems

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in OSI Systems are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting forward indicators, OSI Systems may actually be approaching a critical reversion point that can send shares even higher in July 2024.

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 conflicting basic indicators, Fabrinet may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with OSI Systems and Fabrinet

The main advantage of trading using opposite OSI Systems and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OSI Systems 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 OSI Systems 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.