Correlation Between Loop Industries and FormFactor

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Can any of the company-specific risk be diversified away by investing in both Loop Industries 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 Loop Industries and FormFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loop Industries and FormFactor, you can compare the effects of market volatilities on Loop Industries 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 Loop Industries with a short position of FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loop Industries and FormFactor.

Diversification Opportunities for Loop Industries and FormFactor

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Loop and FormFactor is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Loop Industries and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and Loop Industries 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 Loop Industries 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 Loop Industries i.e., Loop Industries and FormFactor go up and down completely randomly.

Pair Corralation between Loop Industries and FormFactor

Given the investment horizon of 90 days Loop Industries is expected to under-perform the FormFactor. In addition to that, Loop Industries is 1.67 times more volatile than FormFactor. It trades about 0.0 of its total potential returns per unit of risk. FormFactor is currently generating about 0.05 per unit of volatility. If you would invest  2,445  in FormFactor on August 24, 2024 and sell it today you would earn a total of  1,688  from holding FormFactor or generate 69.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Loop Industries  vs.  FormFactor

 Performance 
       Timeline  
Loop Industries 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Loop Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Loop Industries is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
FormFactor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days FormFactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Loop Industries and FormFactor Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Loop Industries and FormFactor

The main advantage of trading using opposite Loop Industries and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loop Industries 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 Loop Industries 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.
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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 Stocks Directory module to find actively traded stocks across global markets.

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