Correlation Between Fabrinet and Quantum

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

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

Diversification Opportunities for Fabrinet and Quantum

-0.4

Correlation Coefficient

Fabrinet  Quantum

Very good diversification

The 3 months correlation between Fabrinet and Quantum is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Quantum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quantum 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 Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quantum has no effect on the direction of Fabrinet i.e., Fabrinet and Quantum go up and down completely randomly.

Pair Corralation between Fabrinet and Quantum

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 5.09 times less return on investment than Quantum. But when comparing it to its historical volatility, Fabrinet is 4.2 times less risky than Quantum. It trades about 0.05 of its potential returns per unit of risk. Quantum is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,360  in Quantum on September 23, 2024 and sell it today you would earn a total of  2,240  from holding Quantum or generate 94.92% return on investment over 90 days.

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

Fabrinet  vs.  Quantum

Fabrinet

Risk-Adjusted Performance

0 of 100

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

Quantum

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Quantum are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Quantum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fabrinet and Quantum

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

The idea behind Fabrinet and Quantum 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.