Correlation Between FARO Technologies and Sensata Technologies
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and Sensata 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 FARO Technologies and Sensata Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and Sensata Technologies Holding, you can compare the effects of market volatilities on FARO Technologies and Sensata 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 FARO Technologies with a short position of Sensata Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and Sensata Technologies.
Diversification Opportunities for FARO Technologies and Sensata Technologies
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FARO and Sensata is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Sensata Technologies Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensata Technologies 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 Sensata Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensata Technologies has no effect on the direction of FARO Technologies i.e., FARO Technologies and Sensata Technologies go up and down completely randomly.
Pair Corralation between FARO Technologies and Sensata Technologies
Given the investment horizon of 90 days FARO Technologies is expected to generate 2.08 times more return on investment than Sensata Technologies. However, FARO Technologies is 2.08 times more volatile than Sensata Technologies Holding. It trades about 0.01 of its potential returns per unit of risk. Sensata Technologies Holding is currently generating about -0.02 per unit of risk. If you would invest 3,152 in FARO Technologies on September 4, 2024 and sell it today you would lose (495.00) from holding FARO Technologies or give up 15.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. Sensata Technologies Holding
Performance |
| Timeline |
| FARO Technologies |
| Sensata Technologies |
FARO Technologies and Sensata Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and Sensata Technologies
The main advantage of trading using opposite FARO Technologies and Sensata Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, Sensata 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 Sensata Technologies will offset losses from the drop in Sensata Technologies' long position.| FARO Technologies vs. Coherent | FARO Technologies vs. ESCO Technologies | FARO Technologies vs. Mesa Laboratories | FARO Technologies vs. Vishay Precision Group |
| Sensata Technologies vs. Coherent | Sensata Technologies vs. ESCO Technologies | Sensata Technologies vs. Mesa Laboratories | Sensata 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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