Correlation Between Fabrinet and Kopin

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

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

Diversification Opportunities for Fabrinet and Kopin

-0.31

Correlation Coefficient

Fabrinet  Kopin

Very good diversification

The 3 months correlation between Fabrinet and Kopin is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Kopin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kopin 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 Kopin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kopin has no effect on the direction of Fabrinet i.e., Fabrinet and Kopin go up and down completely randomly.

Pair Corralation between Fabrinet and Kopin

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 5.03 times less return on investment than Kopin. But when comparing it to its historical volatility, Fabrinet is 2.04 times less risky than Kopin. It trades about 0.05 of its potential returns per unit of risk. Kopin is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Kopin on September 3, 2024 and sell it today you would earn a total of  32.00  from holding Kopin or generate 37.21% return on investment over 90 days.

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

Fabrinet  vs.  Kopin

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 January 2025.

Kopin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kopin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Kopin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fabrinet and Kopin

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

The idea behind Fabrinet and Kopin 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.