Correlation Between Fabrinet and Ensurge Micropower

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

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

Diversification Opportunities for Fabrinet and Ensurge Micropower

-0.22

Correlation Coefficient

Fabrinet  Ensurge Micropower

Very good diversification

The 3 months correlation between Fabrinet and Ensurge is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Ensurge Micropower ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensurge Micropower ASA 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 Ensurge Micropower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensurge Micropower ASA has no effect on the direction of Fabrinet i.e., Fabrinet and Ensurge Micropower go up and down completely randomly.

Pair Corralation between Fabrinet and Ensurge Micropower

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 0.47 times more return on investment than Ensurge Micropower. However, Fabrinet is 2.11 times less risky than Ensurge Micropower. It trades about 0.06 of its potential returns per unit of risk. Ensurge Micropower ASA is currently generating about -0.05 per unit of risk. If you would invest  22,417  in Fabrinet on September 16, 2024 and sell it today you would earn a total of  2,369  from holding Fabrinet or generate 10.57% return on investment over 90 days.

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

Fabrinet  vs.  Ensurge Micropower ASA

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.

Ensurge Micropower ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ensurge Micropower ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fabrinet and Ensurge Micropower

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

The idea behind Fabrinet and Ensurge Micropower ASA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.