Correlation Between FormFactor and Intel

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

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

Diversification Opportunities for FormFactor and Intel

-0.3

Correlation Coefficient

FormFactor  Intel

Very good diversification

The 3 months correlation between FormFactor and Intel is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of FormFactor i.e., FormFactor and Intel go up and down completely randomly.

Pair Corralation between FormFactor and Intel

Given the investment horizon of 90 days FormFactor is expected to generate 1.06 times more return on investment than Intel. However, FormFactor is 1.06 times more volatile than Intel. It trades about 0.04 of its potential returns per unit of risk. Intel is currently generating about -0.14 per unit of risk. If you would invest  4,079  in FormFactor on January 18, 2024 and sell it today you would earn a total of  218.00  from holding FormFactor or generate 5.34% return on investment over 90 days.

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

FormFactor  vs.  Intel

FormFactor

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FormFactor are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, FormFactor may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Intel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel 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 rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with FormFactor and Intel

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

The idea behind FormFactor and Intel 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.