Correlation Between Fabrinet and CDW Corp

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

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

Diversification Opportunities for Fabrinet and CDW Corp

0.02

Correlation Coefficient

Fabrinet  CDW Corp

Significant diversification

The 3 months correlation between Fabrinet and CDW is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp 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 CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of Fabrinet i.e., Fabrinet and CDW Corp go up and down completely randomly.

Pair Corralation between Fabrinet and CDW Corp

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 2.22 times more return on investment than CDW Corp. However, Fabrinet is 2.22 times more volatile than CDW Corp. It trades about -0.01 of its potential returns per unit of risk. CDW Corp is currently generating about -0.15 per unit of risk. If you would invest  24,097  in Fabrinet on September 1, 2024 and sell it today you would lose (639.00) from holding Fabrinet or give up 2.65% of portfolio value over 90 days.

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

Fabrinet  vs.  CDW Corp

Fabrinet

Risk-Adjusted Performance

3 of 100

Insignificant

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

CDW Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDW Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Fabrinet and CDW Corp

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

The idea behind Fabrinet and CDW Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.