Correlation Between FormFactor and RadNet

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

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

Diversification Opportunities for FormFactor and RadNet

0.87

Correlation Coefficient

FormFactor  RadNet

Very poor diversification

The 3 months correlation between FormFactor and RadNet is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and RadNet Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RadNet Inc 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 RadNet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RadNet Inc has no effect on the direction of FormFactor i.e., FormFactor and RadNet go up and down completely randomly.

Pair Corralation between FormFactor and RadNet

Given the investment horizon of 90 days FormFactor is expected to generate 1.06 times more return on investment than RadNet. However, FormFactor is 1.06 times more volatile than RadNet Inc. It trades about -0.2 of its potential returns per unit of risk. RadNet Inc is currently generating about -0.22 per unit of risk. If you would invest  4,587  in FormFactor on December 21, 2024 and sell it today you would lose (1,476) from holding FormFactor or give up 32.18% of portfolio value over 90 days.

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

FormFactor  vs.  RadNet Inc

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.

RadNet Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days RadNet Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with FormFactor and RadNet

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

The idea behind FormFactor and RadNet Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.