Correlation Between FormFactor and MaxLinear

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

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

Diversification Opportunities for FormFactor and MaxLinear

0.47

Correlation Coefficient

FormFactor  MaxLinear

Very weak diversification

The 3 months correlation between FormFactor and MaxLinear is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding FormFactor and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear 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 MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of FormFactor i.e., FormFactor and MaxLinear go up and down completely randomly.

Pair Corralation between FormFactor and MaxLinear

Given the investment horizon of 90 days FormFactor is expected to under-perform the MaxLinear. But the stock apears to be less risky and, when comparing its historical volatility, FormFactor is 1.44 times less risky than MaxLinear. The stock trades about -0.14 of its potential returns per unit of risk. The MaxLinear is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,842  in MaxLinear on January 21, 2024 and sell it today you would earn a total of  123.00  from holding MaxLinear or generate 6.68% return on investment over 90 days.

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

FormFactor  vs.  MaxLinear

FormFactor

Risk-Adjusted Performance

0 of 100

Very Weak

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.

MaxLinear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MaxLinear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with FormFactor and MaxLinear

The main advantage of trading using opposite FormFactor and MaxLinear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FormFactor position performs unexpectedly, MaxLinear 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 MaxLinear will offset losses from the drop in MaxLinear's long position.

The idea behind FormFactor and MaxLinear 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.