Correlation Between FormFactor and TRAVELERS

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

By analyzing existing cross correlation between FormFactor and TRAVELERS INC 46, you can compare the effects of market volatilities on FormFactor and TRAVELERS 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 TRAVELERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FormFactor and TRAVELERS.

Diversification Opportunities for FormFactor and TRAVELERS

-0.09

Correlation Coefficient

FormFactor  TRAVELERS

Good diversification

The 3 months correlation between FormFactor and TRAVELERS is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and TRAVELERS INC 46 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVELERS INC 46 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 TRAVELERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVELERS INC 46 has no effect on the direction of FormFactor i.e., FormFactor and TRAVELERS go up and down completely randomly.

Pair Corralation between FormFactor and TRAVELERS

Given the investment horizon of 90 days FormFactor is expected to under-perform the TRAVELERS. In addition to that, FormFactor is 1.03 times more volatile than TRAVELERS INC 46. It trades about -0.13 of its total potential returns per unit of risk. TRAVELERS INC 46 is currently generating about 0.22 per unit of volatility. If you would invest  8,851  in TRAVELERS INC 46 on October 23, 2024 and sell it today you would earn a total of  590.00  from holding TRAVELERS INC 46 or generate 6.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.42%
Values	Daily Returns

FormFactor  vs.  TRAVELERS INC 46

FormFactor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FormFactor are ranked lower than 1 (%) 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.

TRAVELERS INC 46

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVELERS INC 46 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TRAVELERS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FormFactor and TRAVELERS

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

The idea behind FormFactor and TRAVELERS INC 46 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.