Correlation Between Bel Fuse and FormFactor

Can any of the company-specific risk be diversified away by investing in both Bel Fuse 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 Bel Fuse and FormFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bel Fuse A and FormFactor, you can compare the effects of market volatilities on Bel Fuse 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 Bel Fuse with a short position of FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bel Fuse and FormFactor.

Diversification Opportunities for Bel Fuse and FormFactor

0.28

Correlation Coefficient

Bel Fuse  FormFactor

Modest diversification

The 3 months correlation between Bel and FormFactor is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bel Fuse A and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and Bel Fuse 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 Bel Fuse A 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 Bel Fuse i.e., Bel Fuse and FormFactor go up and down completely randomly.

Pair Corralation between Bel Fuse and FormFactor

Assuming the 90 days horizon Bel Fuse is expected to generate 2.33 times less return on investment than FormFactor. But when comparing it to its historical volatility, Bel Fuse A is 1.33 times less risky than FormFactor. It trades about 0.09 of its potential returns per unit of risk. FormFactor is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,877  in FormFactor on September 5, 2024 and sell it today you would earn a total of  371.00  from holding FormFactor or generate 9.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bel Fuse A  vs.  FormFactor

Bel Fuse A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bel Fuse A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting technical and fundamental indicators, Bel Fuse sustained solid returns over the last few months and may actually be approaching a breakup point.

FormFactor

Risk-Adjusted Performance

0 of 100

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 very healthy basic indicators, FormFactor is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bel Fuse and FormFactor

The main advantage of trading using opposite Bel Fuse and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bel Fuse 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 Bel Fuse A 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 CEOs Directory module to screen CEOs from public companies around the world.