Correlation Between Analog Devices and FormFactor
Can any of the company-specific risk be diversified away by investing in both Analog Devices and FormFactor 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 Analog Devices and FormFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Analog Devices and FormFactor, you can compare the effects of market volatilities on Analog Devices and FormFactor 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 Analog Devices with a short position of FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and FormFactor.
Diversification Opportunities for Analog Devices and FormFactor
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Analog and FormFactor is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and Analog Devices 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 Analog Devices are associated (or correlated) with FormFactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FormFactor has no effect on the direction of Analog Devices i.e., Analog Devices and FormFactor go up and down completely randomly.
Pair Corralation between Analog Devices and FormFactor
Considering the 90-day investment horizon Analog Devices is expected to generate 1.02 times less return on investment than FormFactor. But when comparing it to its historical volatility, Analog Devices is 1.59 times less risky than FormFactor. It trades about 0.02 of its potential returns per unit of risk. FormFactor is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,887 in FormFactor on January 2, 2025 and sell it today you would lose (49.00) from holding FormFactor or give up 1.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Analog Devices vs. FormFactor
Performance |
| Timeline |
| Analog Devices |
| FormFactor |
Analog Devices and FormFactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Analog Devices and FormFactor
The main advantage of trading using opposite Analog Devices and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, FormFactor 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 FormFactor will offset losses from the drop in FormFactor's long position.| Analog Devices vs. NXP Semiconductors NV | ||
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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