Correlation Between Fabrinet and Benchmark Electronics

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

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

Diversification Opportunities for Fabrinet and Benchmark Electronics

0.52

Correlation Coefficient

Fabrinet  Benchmark Electronics

Very weak diversification

The 3 months correlation between Fabrinet and Benchmark is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics 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 Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Fabrinet i.e., Fabrinet and Benchmark Electronics go up and down completely randomly.

Pair Corralation between Fabrinet and Benchmark Electronics

Allowing for the 90-day total investment horizon Fabrinet is expected to generate 1.41 times more return on investment than Benchmark Electronics. However, Fabrinet is 1.41 times more volatile than Benchmark Electronics. It trades about 0.05 of its potential returns per unit of risk. Benchmark Electronics is currently generating about -0.03 per unit of risk. If you would invest  21,439  in Fabrinet on February 22, 2025 and sell it today you would earn a total of  1,589  from holding Fabrinet or generate 7.41% return on investment over 90 days.

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

Fabrinet  vs.  Benchmark Electronics

Fabrinet

Risk-Adjusted Performance

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 displayed solid returns over the last few months and may actually be approaching a breakup point.

Benchmark Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Benchmark Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Fabrinet and Benchmark Electronics

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

The idea behind Fabrinet and Benchmark Electronics 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.