Correlation Between FormFactor and BrightSpring Health

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

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

Diversification Opportunities for FormFactor and BrightSpring Health

-0.58

Correlation Coefficient

FormFactor  BrightSpring Health

Excellent diversification

The 3 months correlation between FormFactor and BrightSpring is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and BrightSpring Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightSpring Health 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 BrightSpring Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightSpring Health has no effect on the direction of FormFactor i.e., FormFactor and BrightSpring Health go up and down completely randomly.

Pair Corralation between FormFactor and BrightSpring Health

Given the investment horizon of 90 days FormFactor is expected to generate 1.34 times more return on investment than BrightSpring Health. However, FormFactor is 1.34 times more volatile than BrightSpring Health Services,. It trades about 0.09 of its potential returns per unit of risk. BrightSpring Health Services, is currently generating about -0.1 per unit of risk. If you would invest  4,200  in FormFactor on October 11, 2024 and sell it today you would earn a total of  211.00  from holding FormFactor or generate 5.02% return on investment over 90 days.

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

FormFactor  vs.  BrightSpring Health Services,

FormFactor

Risk-Adjusted Performance

0 of 100

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.

BrightSpring Health

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BrightSpring Health Services, are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, BrightSpring Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FormFactor and BrightSpring Health

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

The idea behind FormFactor and BrightSpring Health Services, 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.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.