Correlation Between First Community and FormFactor

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

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

Diversification Opportunities for First Community and FormFactor

-0.4

Correlation Coefficient

First Community  FormFactor

Very good diversification

The 3 months correlation between First and FormFactor is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding First Community Bancshares and FormFactor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormFactor and First Community 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 First Community Bancshares 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 First Community i.e., First Community and FormFactor go up and down completely randomly.

Pair Corralation between First Community and FormFactor

Given the investment horizon of 90 days First Community Bancshares is expected to generate 0.82 times more return on investment than FormFactor. However, First Community Bancshares is 1.23 times less risky than FormFactor. It trades about 0.06 of its potential returns per unit of risk. FormFactor is currently generating about 0.0 per unit of risk. If you would invest  4,260  in First Community Bancshares on September 4, 2024 and sell it today you would earn a total of  390.00  from holding First Community Bancshares or generate 9.15% return on investment over 90 days.

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

First Community Bancshares  vs.  FormFactor

First Community Banc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, First Community 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 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 First Community and FormFactor

The main advantage of trading using opposite First Community and FormFactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community 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 First Community Bancshares 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.