Correlation Between Eastman Kodak and Fabrinet

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

By analyzing existing cross correlation between Eastman Kodak Co and Fabrinet, you can compare the effects of market volatilities on Eastman Kodak and Fabrinet 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 Eastman Kodak with a short position of Fabrinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastman Kodak and Fabrinet.

Diversification Opportunities for Eastman Kodak and Fabrinet

-0.17

Correlation Coefficient

Eastman Kodak  Fabrinet

Good diversification

The 3 months correlation between Eastman and Fabrinet is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eastman Kodak Co and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Eastman Kodak 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 Eastman Kodak Co are associated (or correlated) with Fabrinet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabrinet has no effect on the direction of Eastman Kodak i.e., Eastman Kodak and Fabrinet go up and down completely randomly.

Pair Corralation between Eastman Kodak and Fabrinet

Given the investment horizon of 90 days Eastman Kodak Co is expected to under-perform the Fabrinet. In addition to that, Eastman Kodak is 1.11 times more volatile than Fabrinet. It trades about -0.2 of its total potential returns per unit of risk. Fabrinet is currently generating about -0.08 per unit of volatility. If you would invest  18,723  in Fabrinet on February 4, 2024 and sell it today you would lose (801.00) from holding Fabrinet or give up 4.28% of portfolio value over 90 days.

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

Eastman Kodak Co  vs.  Fabrinet

Eastman Kodak

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eastman Kodak Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Eastman Kodak disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Eastman Kodak and Fabrinet

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

The idea behind Eastman Kodak Co and Fabrinet 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.