Correlation Between Ubiquiti Networks and Fabrinet

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

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

Diversification Opportunities for Ubiquiti Networks and Fabrinet

0.6

Correlation Coefficient

Ubiquiti Networks  Fabrinet

Poor diversification

The 3 months correlation between Ubiquiti and Fabrinet is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ubiquiti Networks and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Ubiquiti Networks 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 Ubiquiti Networks 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 Ubiquiti Networks i.e., Ubiquiti Networks and Fabrinet go up and down completely randomly.

Pair Corralation between Ubiquiti Networks and Fabrinet

Allowing for the 90-day total investment horizon Ubiquiti Networks is expected to generate 1.21 times more return on investment than Fabrinet. However, Ubiquiti Networks is 1.21 times more volatile than Fabrinet. It trades about -0.11 of its potential returns per unit of risk. Fabrinet is currently generating about -0.15 per unit of risk. If you would invest  11,585  in Ubiquiti Networks on January 28, 2024 and sell it today you would lose (755.00) from holding Ubiquiti Networks or give up 6.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ubiquiti Networks  vs.  Fabrinet

Ubiquiti Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ubiquiti Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing 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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ubiquiti Networks and Fabrinet

The main advantage of trading using opposite Ubiquiti Networks and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ubiquiti Networks 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 Ubiquiti Networks 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.