Correlation Between Arm Holdings and FormFactor

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

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

Diversification Opportunities for Arm Holdings and FormFactor

0.67

Correlation Coefficient

Arm Holdings  FormFactor

Poor diversification

The 3 months correlation between Arm and FormFactor is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and Arm Holdings 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 Arm Holdings plc 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 Arm Holdings i.e., Arm Holdings and FormFactor go up and down completely randomly.

Pair Corralation between Arm Holdings and FormFactor

Considering the 90-day investment horizon Arm Holdings plc is expected to generate 0.87 times more return on investment than FormFactor. However, Arm Holdings plc is 1.15 times less risky than FormFactor. It trades about 0.03 of its potential returns per unit of risk. FormFactor is currently generating about -0.03 per unit of risk. If you would invest  13,396  in Arm Holdings plc on May 27, 2025 and sell it today you would earn a total of  396.00  from holding Arm Holdings plc or generate 2.96% return on investment over 90 days.

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

Arm Holdings plc  vs.  FormFactor

Arm Holdings plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Arm Holdings is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

FormFactor

Risk-Adjusted Performance

Weakest

Over the last 90 days FormFactor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, FormFactor is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Arm Holdings and FormFactor

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

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.