Correlation Between Dana and FormFactor

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

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

Diversification Opportunities for Dana and FormFactor

0.82

Correlation Coefficient

Dana  FormFactor

Very poor diversification

The 3 months correlation between Dana and FormFactor is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dana Inc and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and Dana 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 Dana Inc 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 Dana i.e., Dana and FormFactor go up and down completely randomly.

Pair Corralation between Dana and FormFactor

Considering the 90-day investment horizon Dana Inc is expected to generate 0.96 times more return on investment than FormFactor. However, Dana Inc is 1.04 times less risky than FormFactor. It trades about -0.02 of its potential returns per unit of risk. FormFactor is currently generating about -0.04 per unit of risk. If you would invest  1,352  in Dana Inc on September 3, 2024 and sell it today you would lose (219.00) from holding Dana Inc or give up 16.2% of portfolio value over 90 days.

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

Dana Inc  vs.  FormFactor

Dana Inc

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dana may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 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 Dana and FormFactor

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