Correlation Between FARO Technologies and Itron
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and Itron 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 FARO Technologies and Itron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and Itron Inc, you can compare the effects of market volatilities on FARO Technologies and Itron 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 FARO Technologies with a short position of Itron. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and Itron.
Diversification Opportunities for FARO Technologies and Itron
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FARO and Itron is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Itron Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itron Inc and FARO Technologies 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 FARO Technologies are associated (or correlated) with Itron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itron Inc has no effect on the direction of FARO Technologies i.e., FARO Technologies and Itron go up and down completely randomly.
Pair Corralation between FARO Technologies and Itron
Given the investment horizon of 90 days FARO Technologies is expected to generate 2.62 times more return on investment than Itron. However, FARO Technologies is 2.62 times more volatile than Itron Inc. It trades about 0.15 of its potential returns per unit of risk. Itron Inc is currently generating about 0.17 per unit of risk. If you would invest 1,735 in FARO Technologies on August 31, 2024 and sell it today you would earn a total of 892.00 from holding FARO Technologies or generate 51.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. Itron Inc
Performance |
| Timeline |
| FARO Technologies |
| Itron Inc |
FARO Technologies and Itron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and Itron
The main advantage of trading using opposite FARO Technologies and Itron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, Itron 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 Itron will offset losses from the drop in Itron's long position.| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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