Correlation Between Micron Technology and Fabrinet

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

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

Diversification Opportunities for Micron Technology and Fabrinet

-0.6

Correlation Coefficient

Micron Technology  Fabrinet

Excellent diversification

The 3 months correlation between Micron and Fabrinet is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and Fabrinet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabrinet and Micron Technology 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 Micron Technology 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 Micron Technology i.e., Micron Technology and Fabrinet go up and down completely randomly.

Pair Corralation between Micron Technology and Fabrinet

Allowing for the 90-day total investment horizon Micron Technology is expected to generate 1.32 times more return on investment than Fabrinet. However, Micron Technology is 1.32 times more volatile than Fabrinet. It trades about -0.05 of its potential returns per unit of risk. Fabrinet is currently generating about -0.26 per unit of risk. If you would invest  11,702  in Micron Technology on January 25, 2024 and sell it today you would lose (456.00) from holding Micron Technology or give up 3.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Micron Technology  vs.  Fabrinet

Micron Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Micron Technology unveiled 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 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.

Pair Trading with Micron Technology and Fabrinet

The main advantage of trading using opposite Micron Technology and Fabrinet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology 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 Micron Technology 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..