Correlation Between NLIGHT and FormFactor
Can any of the company-specific risk be diversified away by investing in both NLIGHT 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 NLIGHT and FormFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between nLIGHT Inc and FormFactor, you can compare the effects of market volatilities on NLIGHT 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 NLIGHT with a short position of FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of NLIGHT and FormFactor.
Diversification Opportunities for NLIGHT and FormFactor
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between NLIGHT and FormFactor is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding nLIGHT Inc and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and NLIGHT 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 nLIGHT Inc 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 NLIGHT i.e., NLIGHT and FormFactor go up and down completely randomly.
Pair Corralation between NLIGHT and FormFactor
Given the investment horizon of 90 days nLIGHT Inc is expected to under-perform the FormFactor. In addition to that, NLIGHT is 1.61 times more volatile than FormFactor. It trades about -0.1 of its total potential returns per unit of risk. FormFactor is currently generating about -0.14 per unit of volatility. If you would invest 4,517 in FormFactor on August 30, 2024 and sell it today you would lose (586.00) from holding FormFactor or give up 12.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
nLIGHT Inc vs. FormFactor
Performance |
| Timeline |
| nLIGHT Inc |
| FormFactor |
NLIGHT and FormFactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NLIGHT and FormFactor
The main advantage of trading using opposite NLIGHT and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NLIGHT 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 nLIGHT Inc 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. First Solar | FormFactor vs. Sunrun Inc | FormFactor vs. Canadian Solar | FormFactor vs. SolarEdge Technologies |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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