Correlation Between Fabrinet and Amphenol

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

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

Diversification Opportunities for Fabrinet and Amphenol

0.75

Correlation Coefficient

Fabrinet  Amphenol

Poor diversification

The 3 months correlation between Fabrinet and Amphenol is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Amphenol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amphenol and Fabrinet 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 Fabrinet are associated (or correlated) with Amphenol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amphenol has no effect on the direction of Fabrinet i.e., Fabrinet and Amphenol go up and down completely randomly.

Pair Corralation between Fabrinet and Amphenol

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 1.75 times more return on investment than Amphenol. However, Fabrinet is 1.75 times more volatile than Amphenol. It trades about -0.01 of its potential returns per unit of risk. Amphenol is currently generating about -0.01 per unit of risk. If you would invest  21,476  in Fabrinet on December 30, 2024 and sell it today you would lose (1,862) from holding Fabrinet or give up 8.67% of portfolio value over 90 days.

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

Fabrinet  vs.  Amphenol

Fabrinet

Risk-Adjusted Performance

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

Amphenol

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amphenol has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Amphenol is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Fabrinet and Amphenol

The main advantage of trading using opposite Fabrinet and Amphenol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, Amphenol 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 Amphenol will offset losses from the drop in Amphenol's long position.

The idea behind Fabrinet and Amphenol 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.