Correlation Between VOXX International and Fabrinet

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

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

Diversification Opportunities for VOXX International and Fabrinet

0.25

Correlation Coefficient

VOXX International  Fabrinet

Modest diversification

The 3 months correlation between VOXX and Fabrinet is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding VOXX International and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and VOXX International 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 VOXX International 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 VOXX International i.e., VOXX International and Fabrinet go up and down completely randomly.

Pair Corralation between VOXX International and Fabrinet

Given the investment horizon of 90 days VOXX International is expected to under-perform the Fabrinet. In addition to that, VOXX International is 1.56 times more volatile than Fabrinet. It trades about -0.26 of its total potential returns per unit of risk. Fabrinet is currently generating about 0.34 per unit of volatility. If you would invest  17,848  in Fabrinet on February 11, 2024 and sell it today you would earn a total of  4,425  from holding Fabrinet or generate 24.79% return on investment over 90 days.

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

VOXX International  vs.  Fabrinet

VOXX International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VOXX International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Fabrinet

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with VOXX International and Fabrinet

The main advantage of trading using opposite VOXX International and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VOXX International 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 VOXX International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.