Correlation Between Alpha and FormFactor
Can any of the company-specific risk be diversified away by investing in both Alpha 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 Alpha and FormFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alpha and Omega and FormFactor, you can compare the effects of market volatilities on Alpha 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 Alpha with a short position of FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha and FormFactor.
Diversification Opportunities for Alpha and FormFactor
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alpha and FormFactor is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Alpha and Omega and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and Alpha 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 Alpha and Omega 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 Alpha i.e., Alpha and FormFactor go up and down completely randomly.
Pair Corralation between Alpha and FormFactor
Given the investment horizon of 90 days Alpha and Omega is expected to under-perform the FormFactor. In addition to that, Alpha is 1.48 times more volatile than FormFactor. It trades about -0.15 of its total potential returns per unit of risk. FormFactor is currently generating about -0.18 per unit of volatility. If you would invest 4,346 in FormFactor on November 18, 2024 and sell it today you would lose (566.00) from holding FormFactor or give up 13.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alpha and Omega vs. FormFactor
Performance |
| Timeline |
| Alpha and Omega |
| FormFactor |
Alpha and FormFactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alpha and FormFactor
The main advantage of trading using opposite Alpha and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha 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.The idea behind Alpha and Omega and FormFactor 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.| FormFactor vs. Silicon Laboratories | FormFactor vs. Diodes Incorporated | FormFactor vs. MACOM Technology Solutions | FormFactor vs. Amkor Technology |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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