Correlation Between Fabrinet and Clean Energy

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

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

Diversification Opportunities for Fabrinet and Clean Energy

0.0

Correlation Coefficient

Fabrinet  Clean Energy

Pay attention - limited upside

The 3 months correlation between Fabrinet and Clean is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Clean Energy Pathway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Energy Pathway 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 Clean Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Energy Pathway has no effect on the direction of Fabrinet i.e., Fabrinet and Clean Energy go up and down completely randomly.

Pair Corralation between Fabrinet and Clean Energy

If you would invest  23,485  in Fabrinet on September 16, 2024 and sell it today you would earn a total of  1,301  from holding Fabrinet or generate 5.54% return on investment over 90 days.

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

Fabrinet  vs.  Clean Energy Pathway

Fabrinet

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fabrinet are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Fabrinet displayed solid returns over the last few months and may actually be approaching a breakup point.

Clean Energy Pathway

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Energy Pathway has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Clean Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fabrinet and Clean Energy

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

The idea behind Fabrinet and Clean Energy Pathway 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.