Correlation Between FormFactor and NLIGHT
Can any of the company-specific risk be diversified away by investing in both FormFactor and NLIGHT 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 FormFactor and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FormFactor and nLIGHT Inc, you can compare the effects of market volatilities on FormFactor and NLIGHT 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 FormFactor with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of FormFactor and NLIGHT.
Diversification Opportunities for FormFactor and NLIGHT
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between FormFactor and NLIGHT is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and FormFactor 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 FormFactor are associated (or correlated) with NLIGHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nLIGHT Inc has no effect on the direction of FormFactor i.e., FormFactor and NLIGHT go up and down completely randomly.
Pair Corralation between FormFactor and NLIGHT
Given the investment horizon of 90 days FormFactor is expected to generate 0.82 times more return on investment than NLIGHT. However, FormFactor is 1.22 times less risky than NLIGHT. It trades about 0.05 of its potential returns per unit of risk. nLIGHT Inc is currently generating about 0.02 per unit of risk. If you would invest 2,370 in FormFactor on August 27, 2024 and sell it today you would earn a total of 1,763 from holding FormFactor or generate 74.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FormFactor vs. nLIGHT Inc
Performance |
| Timeline |
| FormFactor |
| nLIGHT Inc |
FormFactor and NLIGHT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FormFactor and NLIGHT
The main advantage of trading using opposite FormFactor and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FormFactor position performs unexpectedly, NLIGHT 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 NLIGHT will offset losses from the drop in NLIGHT's long position.| 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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