Correlation Between SentinelOne and FormFactor
Can any of the company-specific risk be diversified away by investing in both SentinelOne 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 SentinelOne and FormFactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SentinelOne and FormFactor, you can compare the effects of market volatilities on SentinelOne 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 SentinelOne with a short position of FormFactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of SentinelOne and FormFactor.
Diversification Opportunities for SentinelOne and FormFactor
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SentinelOne and FormFactor is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and SentinelOne 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 SentinelOne 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 SentinelOne i.e., SentinelOne and FormFactor go up and down completely randomly.
Pair Corralation between SentinelOne and FormFactor
Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the FormFactor. But the stock apears to be less risky and, when comparing its historical volatility, SentinelOne is 1.7 times less risky than FormFactor. The stock trades about -0.06 of its potential returns per unit of risk. The FormFactor is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,627 in FormFactor on February 28, 2024 and sell it today you would earn a total of 1,213 from holding FormFactor or generate 26.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
SentinelOne vs. FormFactor
Performance |
Timeline |
SentinelOne |
FormFactor |
SentinelOne and FormFactor Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SentinelOne and FormFactor
The main advantage of trading using opposite SentinelOne and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne 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 SentinelOne 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.FormFactor vs. Taiwan Semiconductor Manufacturing | FormFactor vs. Marvell Technology Group | FormFactor vs. Advanced Micro Devices | FormFactor vs. Broadcom |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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