Correlation Between Fabrinet and Franklin Wireless

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

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

Diversification Opportunities for Fabrinet and Franklin Wireless

-0.04

Correlation Coefficient

Fabrinet  Franklin Wireless

Good diversification

The 3 months correlation between Fabrinet and Franklin is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Fabrinet and Franklin Wireless Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Wireless Corp 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 Franklin Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Wireless Corp has no effect on the direction of Fabrinet i.e., Fabrinet and Franklin Wireless go up and down completely randomly.

Pair Corralation between Fabrinet and Franklin Wireless

Allowing for the 90-day total investment horizon Fabrinet is expected to under-perform the Franklin Wireless. In addition to that, Fabrinet is 1.39 times more volatile than Franklin Wireless Corp. It trades about -0.22 of its total potential returns per unit of risk. Franklin Wireless Corp is currently generating about -0.02 per unit of volatility. If you would invest  297.00  in Franklin Wireless Corp on January 20, 2024 and sell it today you would lose (4.00) from holding Franklin Wireless Corp or give up 1.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Fabrinet  vs.  Franklin Wireless Corp

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

Franklin Wireless Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Wireless Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Franklin Wireless is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Fabrinet and Franklin Wireless

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

The idea behind Fabrinet and Franklin Wireless Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.