Correlation Between EMCORE and FormFactor
Can any of the company-specific risk be diversified away by investing in both EMCORE 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 EMCORE and FormFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EMCORE and FormFactor, you can compare the effects of market volatilities on EMCORE 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 EMCORE with a short position of FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of EMCORE and FormFactor.
Diversification Opportunities for EMCORE and FormFactor
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EMCORE and FormFactor is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding EMCORE and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and EMCORE 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 EMCORE 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 EMCORE i.e., EMCORE and FormFactor go up and down completely randomly.
Pair Corralation between EMCORE and FormFactor
Given the investment horizon of 90 days EMCORE is expected to generate 1.69 times more return on investment than FormFactor. However, EMCORE is 1.69 times more volatile than FormFactor. It trades about 0.27 of its potential returns per unit of risk. FormFactor is currently generating about -0.06 per unit of risk. If you would invest 213.00 in EMCORE on August 28, 2024 and sell it today you would earn a total of 87.00 from holding EMCORE or generate 40.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EMCORE vs. FormFactor
Performance |
| Timeline |
| EMCORE |
| FormFactor |
EMCORE and FormFactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EMCORE and FormFactor
The main advantage of trading using opposite EMCORE and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMCORE 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 EMCORE 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.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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