Correlation Between Big Tree and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both Big Tree and FARO Technologies 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 Big Tree and FARO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big Tree Cloud and FARO Technologies, you can compare the effects of market volatilities on Big Tree and FARO Technologies 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 Big Tree with a short position of FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Tree and FARO Technologies.
Diversification Opportunities for Big Tree and FARO Technologies
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Big and FARO is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and Big Tree 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 Big Tree Cloud are associated (or correlated) with FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of Big Tree i.e., Big Tree and FARO Technologies go up and down completely randomly.
Pair Corralation between Big Tree and FARO Technologies
Considering the 90-day investment horizon Big Tree Cloud is expected to generate 2.67 times more return on investment than FARO Technologies. However, Big Tree is 2.67 times more volatile than FARO Technologies. It trades about 0.02 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.03 per unit of risk. If you would invest 1,022 in Big Tree Cloud on December 2, 2024 and sell it today you would lose (825.00) from holding Big Tree Cloud or give up 80.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big Tree Cloud vs. FARO Technologies
Performance |
| Timeline |
| Big Tree Cloud |
| FARO Technologies |
Big Tree and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big Tree and FARO Technologies
The main advantage of trading using opposite Big Tree and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Tree position performs unexpectedly, FARO Technologies 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 FARO Technologies will offset losses from the drop in FARO Technologies' long position.| Big Tree vs. Jutal Offshore Oil | Big Tree vs. BK Technologies | Big Tree vs. Grupo Televisa SAB | Big Tree vs. Zhihu Inc ADR |
| FARO Technologies vs. Coherent | FARO Technologies vs. ESCO Technologies | FARO Technologies vs. Mesa Laboratories | FARO Technologies vs. Vishay Precision Group |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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