Correlation Between Eltek and Fabrinet
Can any of the company-specific risk be diversified away by investing in both Eltek 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 Eltek and Fabrinet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eltek and Fabrinet, you can compare the effects of market volatilities on Eltek 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 Eltek with a short position of Fabrinet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eltek and Fabrinet.
Diversification Opportunities for Eltek and Fabrinet
Very weak diversification
The 3 months correlation between Eltek and Fabrinet is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eltek and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Eltek 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 Eltek 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 Eltek i.e., Eltek and Fabrinet go up and down completely randomly.
Pair Corralation between Eltek and Fabrinet
Given the investment horizon of 90 days Eltek is expected to under-perform the Fabrinet. In addition to that, Eltek is 1.74 times more volatile than Fabrinet. It trades about -0.09 of its total potential returns per unit of risk. Fabrinet is currently generating about -0.08 per unit of volatility. If you would invest 20,728 in Fabrinet on January 24, 2024 and sell it today you would lose (4,311) from holding Fabrinet or give up 20.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.44% |
| Values | Daily Returns |
Eltek vs. Fabrinet
Performance |
| Timeline |
| Eltek |
| Fabrinet |
Eltek and Fabrinet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eltek and Fabrinet
The main advantage of trading using opposite Eltek and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eltek 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.| Eltek vs. Methode Electronics | Eltek vs. OSI Systems | Eltek vs. Bel Fuse A | Eltek vs. Richardson Electronics |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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