Correlation Between FormFactor and NextNav Warrant

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

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

Diversification Opportunities for FormFactor and NextNav Warrant

0.68

Correlation Coefficient

FormFactor  NextNav Warrant

Poor diversification

The 3 months correlation between FormFactor and NextNav is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and NextNav Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextNav Warrant 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 NextNav Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextNav Warrant has no effect on the direction of FormFactor i.e., FormFactor and NextNav Warrant go up and down completely randomly.

Pair Corralation between FormFactor and NextNav Warrant

Given the investment horizon of 90 days FormFactor is expected to under-perform the NextNav Warrant. But the stock apears to be less risky and, when comparing its historical volatility, FormFactor is 2.7 times less risky than NextNav Warrant. The stock trades about -0.23 of its potential returns per unit of risk. The NextNav Warrant is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  642.00  in NextNav Warrant on December 30, 2024 and sell it today you would lose (162.00) from holding NextNav Warrant or give up 25.23% of portfolio value over 90 days.

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

FormFactor  vs.  NextNav Warrant

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.

NextNav Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days NextNav Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with FormFactor and NextNav Warrant

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

The idea behind FormFactor and NextNav Warrant 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.