Correlation Between Nano Labs and FormFactor

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

By analyzing existing cross correlation between Nano Labs and FormFactor, you can compare the effects of market volatilities on Nano Labs and FormFactor 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 Nano Labs with a short position of FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nano Labs and FormFactor.

Diversification Opportunities for Nano Labs and FormFactor

0.21

Correlation Coefficient

Nano Labs  FormFactor

Modest diversification

The 3 months correlation between Nano and FormFactor is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Nano Labs and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and Nano Labs 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 Nano Labs are associated (or correlated) with FormFactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FormFactor has no effect on the direction of Nano Labs i.e., Nano Labs and FormFactor go up and down completely randomly.

Pair Corralation between Nano Labs and FormFactor

Allowing for the 90-day total investment horizon Nano Labs is expected to generate 8.33 times more return on investment than FormFactor. However, Nano Labs is 8.33 times more volatile than FormFactor. It trades about 0.22 of its potential returns per unit of risk. FormFactor is currently generating about 0.1 per unit of risk. If you would invest  437.00  in Nano Labs on September 22, 2024 and sell it today you would earn a total of  409.00  from holding Nano Labs or generate 93.59% return on investment over 90 days.

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

Nano Labs  vs.  FormFactor

Nano Labs

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nano Labs are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Nano Labs sustained solid returns over the last few months and may actually be approaching a breakup point.

FormFactor

Risk-Adjusted Performance

0 of 100

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 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.

Pair Trading with Nano Labs and FormFactor

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

The idea behind Nano Labs and FormFactor 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.