Correlation Between FormFactor and Exchange Bankshares

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

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

Diversification Opportunities for FormFactor and Exchange Bankshares

0.07

Correlation Coefficient

FormFactor  Exchange Bankshares

Significant diversification

The 3 months correlation between FormFactor and Exchange is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and Exchange Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bankshares 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 Exchange Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bankshares has no effect on the direction of FormFactor i.e., FormFactor and Exchange Bankshares go up and down completely randomly.

Pair Corralation between FormFactor and Exchange Bankshares

Given the investment horizon of 90 days FormFactor is expected to generate 1.66 times more return on investment than Exchange Bankshares. However, FormFactor is 1.66 times more volatile than Exchange Bankshares. It trades about 0.06 of its potential returns per unit of risk. Exchange Bankshares is currently generating about 0.02 per unit of risk. If you would invest  2,491  in FormFactor on October 10, 2024 and sell it today you would earn a total of  2,233  from holding FormFactor or generate 89.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	62.42%
Values	Daily Returns

FormFactor  vs.  Exchange Bankshares

FormFactor

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FormFactor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Exchange Bankshares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bankshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Exchange Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FormFactor and Exchange Bankshares

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

The idea behind FormFactor and Exchange Bankshares 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.