Correlation Between FormFactor and Nordic Semiconductor

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

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

Diversification Opportunities for FormFactor and Nordic Semiconductor

0.1

Correlation Coefficient

FormFactor  Nordic Semiconductor

Average diversification

The 3 months correlation between FormFactor and Nordic is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and Nordic Semiconductor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Semiconductor ASA 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 Nordic Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Semiconductor ASA has no effect on the direction of FormFactor i.e., FormFactor and Nordic Semiconductor go up and down completely randomly.

Pair Corralation between FormFactor and Nordic Semiconductor

Given the investment horizon of 90 days FormFactor is expected to generate 1.0 times more return on investment than Nordic Semiconductor. However, FormFactor is 1.0 times more volatile than Nordic Semiconductor ASA. It trades about 0.18 of its potential returns per unit of risk. Nordic Semiconductor ASA is currently generating about 0.17 per unit of risk. If you would invest  4,289  in FormFactor on October 10, 2024 and sell it today you would earn a total of  435.00  from holding FormFactor or generate 10.14% return on investment over 90 days.

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

FormFactor  vs.  Nordic Semiconductor ASA

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.

Nordic Semiconductor ASA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Semiconductor ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Nordic Semiconductor is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FormFactor and Nordic Semiconductor

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

The idea behind FormFactor and Nordic Semiconductor ASA 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.