Correlation Between FormFactor and Aehr Test

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Can any of the company-specific risk be diversified away by investing in both FormFactor and Aehr Test 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 Aehr Test into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FormFactor and Aehr Test Systems, you can compare the effects of market volatilities on FormFactor and Aehr Test 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 Aehr Test. Check out your portfolio center. Please also check ongoing floating volatility patterns of FormFactor and Aehr Test.

Diversification Opportunities for FormFactor and Aehr Test

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between FormFactor and Aehr is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and Aehr Test Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aehr Test Systems 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 Aehr Test. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aehr Test Systems has no effect on the direction of FormFactor i.e., FormFactor and Aehr Test go up and down completely randomly.

Pair Corralation between FormFactor and Aehr Test

Given the investment horizon of 90 days FormFactor is expected to generate 0.35 times more return on investment than Aehr Test. However, FormFactor is 2.88 times less risky than Aehr Test. It trades about 0.21 of its potential returns per unit of risk. Aehr Test Systems is currently generating about -0.15 per unit of risk. If you would invest  4,154  in FormFactor on December 30, 2023 and sell it today you would earn a total of  409.00  from holding FormFactor or generate 9.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

FormFactor  vs.  Aehr Test Systems

 Performance 
       Timeline  
FormFactor 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in FormFactor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, FormFactor displayed solid returns over the last few months and may actually be approaching a breakup point.
Aehr Test Systems 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Aehr Test Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

FormFactor and Aehr Test Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FormFactor and Aehr Test

The main advantage of trading using opposite FormFactor and Aehr Test positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FormFactor position performs unexpectedly, Aehr Test 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 Aehr Test will offset losses from the drop in Aehr Test's long position.
The idea behind FormFactor and Aehr Test Systems 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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