Correlation Between FormFactor and EMCORE

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

Diversification Opportunities for FormFactor and EMCORE

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between FormFactor and EMCORE is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and EMCORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMCORE 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 EMCORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMCORE has no effect on the direction of FormFactor i.e., FormFactor and EMCORE go up and down completely randomly.

Pair Corralation between FormFactor and EMCORE

Given the investment horizon of 90 days FormFactor is expected to generate 0.58 times more return on investment than EMCORE. However, FormFactor is 1.72 times less risky than EMCORE. It trades about 0.03 of its potential returns per unit of risk. EMCORE is currently generating about -0.06 per unit of risk. If you would invest  3,482  in FormFactor on December 30, 2023 and sell it today you would earn a total of  1,081  from holding FormFactor or generate 31.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

FormFactor  vs.  EMCORE

 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.
EMCORE 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days EMCORE has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's forward-looking signals 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 EMCORE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FormFactor and EMCORE

The main advantage of trading using opposite FormFactor and EMCORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FormFactor position performs unexpectedly, EMCORE 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 EMCORE will offset losses from the drop in EMCORE's long position.
The idea behind FormFactor and EMCORE 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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