Correlation Between Henan Ancai and Fabrinet

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

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

Diversification Opportunities for Henan Ancai and Fabrinet

0.47

Correlation Coefficient

Henan Ancai  Fabrinet

Very weak diversification

The 3 months correlation between Henan and Fabrinet is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Henan Ancai Hi tech and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Henan Ancai 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 Henan Ancai Hi tech 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 Henan Ancai i.e., Henan Ancai and Fabrinet go up and down completely randomly.

Pair Corralation between Henan Ancai and Fabrinet

Assuming the 90 days trading horizon Henan Ancai Hi tech is expected to generate 1.45 times more return on investment than Fabrinet. However, Henan Ancai is 1.45 times more volatile than Fabrinet. It trades about 0.04 of its potential returns per unit of risk. Fabrinet is currently generating about -0.08 per unit of risk. If you would invest  467.00  in Henan Ancai Hi tech on August 21, 2024 and sell it today you would earn a total of  11.00  from holding Henan Ancai Hi tech or generate 2.36% return on investment over 90 days.

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

Henan Ancai Hi tech  vs.  Fabrinet

Henan Ancai Hi

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Henan Ancai Hi tech are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Henan Ancai sustained 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 December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Henan Ancai and Fabrinet

The main advantage of trading using opposite Henan Ancai and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henan Ancai 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 Henan Ancai Hi tech 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .