Correlation Between FormFactor and ASE Industrial

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

By analyzing existing cross correlation between FormFactor and ASE Industrial Holding, you can compare the effects of market volatilities on FormFactor and ASE Industrial 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 ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of FormFactor and ASE Industrial.

Diversification Opportunities for FormFactor and ASE Industrial

0.54

Correlation Coefficient

FormFactor  ASE Industrial

Very weak diversification

The 3 months correlation between FormFactor and ASE is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding 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 ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of FormFactor i.e., FormFactor and ASE Industrial go up and down completely randomly.

Pair Corralation between FormFactor and ASE Industrial

Given the investment horizon of 90 days FormFactor is expected to under-perform the ASE Industrial. In addition to that, FormFactor is 1.09 times more volatile than ASE Industrial Holding. It trades about -0.24 of its total potential returns per unit of risk. ASE Industrial Holding is currently generating about -0.07 per unit of volatility. If you would invest  1,015  in ASE Industrial Holding on December 29, 2024 and sell it today you would lose (135.00) from holding ASE Industrial Holding or give up 13.3% of portfolio value over 90 days.

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

FormFactor  vs.  ASE Industrial Holding

FormFactor

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ASE Industrial Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASE Industrial Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with FormFactor and ASE Industrial

The main advantage of trading using opposite FormFactor and ASE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FormFactor position performs unexpectedly, ASE Industrial 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 ASE Industrial will offset losses from the drop in ASE Industrial's long position.

The idea behind FormFactor and ASE Industrial Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.