Correlation Between Fabrinet and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both Fabrinet and Emerson Radio 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 Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fabrinet and Emerson Radio, you can compare the effects of market volatilities on Fabrinet and Emerson Radio 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 Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fabrinet and Emerson Radio.
Diversification Opportunities for Fabrinet and Emerson Radio
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Fabrinet and Emerson is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio 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 Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of Fabrinet i.e., Fabrinet and Emerson Radio go up and down completely randomly.
Pair Corralation between Fabrinet and Emerson Radio
Allowing for the 90-day total investment horizon Fabrinet is expected to under-perform the Emerson Radio. But the stock apears to be less risky and, when comparing its historical volatility, Fabrinet is 1.15 times less risky than Emerson Radio. The stock trades about -0.19 of its potential returns per unit of risk. The Emerson Radio is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 54.00 in Emerson Radio on January 26, 2024 and sell it today you would earn a total of 0.68 from holding Emerson Radio or generate 1.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Fabrinet vs. Emerson Radio
Performance |
| Timeline |
| Fabrinet |
| Emerson Radio |
Fabrinet and Emerson Radio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fabrinet and Emerson Radio
The main advantage of trading using opposite Fabrinet and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fabrinet position performs unexpectedly, Emerson Radio 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 Emerson Radio will offset losses from the drop in Emerson Radio's long position.The idea behind Fabrinet and Emerson Radio 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.| Emerson Radio vs. LG Display Co | Emerson Radio vs. Turtle Beach Corp | Emerson Radio vs. Vuzix Corp Cmn | Emerson Radio vs. Sony Corp |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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