Correlation Between ASE Industrial and FormFactor

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

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

Diversification Opportunities for ASE Industrial and FormFactor

0.74

Correlation Coefficient

ASE Industrial  FormFactor

Poor diversification

The 3 months correlation between ASE and FormFactor is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and ASE Industrial 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 ASE Industrial Holding 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 ASE Industrial i.e., ASE Industrial and FormFactor go up and down completely randomly.

Pair Corralation between ASE Industrial and FormFactor

Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 0.75 times more return on investment than FormFactor. However, ASE Industrial Holding is 1.33 times less risky than FormFactor. It trades about 0.07 of its potential returns per unit of risk. FormFactor is currently generating about 0.02 per unit of risk. If you would invest  532.00  in ASE Industrial Holding on January 27, 2024 and sell it today you would earn a total of  483.00  from holding ASE Industrial Holding or generate 90.79% return on investment over 90 days.

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

ASE Industrial Holding  vs.  FormFactor

ASE Industrial Holding

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ASE Industrial Holding are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, ASE Industrial may actually be approaching a critical reversion point that can send shares even higher in May 2024.

FormFactor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FormFactor are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FormFactor may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with ASE Industrial and FormFactor

The main advantage of trading using opposite ASE Industrial and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial 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 ASE Industrial Holding 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.