Correlation Between NVIDIA and FormFactor

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

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

Diversification Opportunities for NVIDIA and FormFactor

0.0

Correlation Coefficient

NVIDIA  FormFactor

Pay attention - limited upside

The 3 months correlation between NVIDIA and FormFactor is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and NVIDIA 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 NVIDIA 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 NVIDIA i.e., NVIDIA and FormFactor go up and down completely randomly.

Pair Corralation between NVIDIA and FormFactor

Given the investment horizon of 90 days NVIDIA is expected to generate 0.52 times more return on investment than FormFactor. However, NVIDIA is 1.91 times less risky than FormFactor. It trades about 0.33 of its potential returns per unit of risk. FormFactor is currently generating about -0.04 per unit of risk. If you would invest  12,992  in NVIDIA on May 13, 2025 and sell it today you would earn a total of  5,278  from holding NVIDIA or generate 40.63% return on investment over 90 days.

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

NVIDIA  vs.  FormFactor

NVIDIA

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with NVIDIA and FormFactor

The main advantage of trading using opposite NVIDIA and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NVIDIA 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 NVIDIA 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.