Correlation Between FARO Technologies and SOFI TECHNOLOGIES
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and SOFI 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 SOFI 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 SOFI TECHNOLOGIES, you can compare the effects of market volatilities on FARO Technologies and SOFI 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 SOFI TECHNOLOGIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and SOFI TECHNOLOGIES.
Diversification Opportunities for FARO Technologies and SOFI TECHNOLOGIES
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FARO and SOFI is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and SOFI TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFI 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 SOFI TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFI TECHNOLOGIES has no effect on the direction of FARO Technologies i.e., FARO Technologies and SOFI TECHNOLOGIES go up and down completely randomly.
Pair Corralation between FARO Technologies and SOFI TECHNOLOGIES
Assuming the 90 days horizon FARO Technologies is expected to generate 2.26 times more return on investment than SOFI TECHNOLOGIES. However, FARO Technologies is 2.26 times more volatile than SOFI TECHNOLOGIES. It trades about 0.28 of its potential returns per unit of risk. SOFI TECHNOLOGIES is currently generating about 0.57 per unit of risk. If you would invest 1,610 in FARO Technologies on September 1, 2024 and sell it today you would earn a total of 870.00 from holding FARO Technologies or generate 54.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. SOFI TECHNOLOGIES
Performance |
| Timeline |
| FARO Technologies |
| SOFI TECHNOLOGIES |
FARO Technologies and SOFI TECHNOLOGIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and SOFI TECHNOLOGIES
The main advantage of trading using opposite FARO Technologies and SOFI TECHNOLOGIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, SOFI 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 SOFI TECHNOLOGIES will offset losses from the drop in SOFI TECHNOLOGIES's long position.| FARO Technologies vs. Perseus Mining Limited | FARO Technologies vs. LION ONE METALS | FARO Technologies vs. Western Copper and | FARO Technologies vs. TreeHouse Foods |
| SOFI TECHNOLOGIES vs. Apple Inc | SOFI TECHNOLOGIES vs. Apple Inc | SOFI TECHNOLOGIES vs. Apple Inc | SOFI TECHNOLOGIES vs. Apple Inc |
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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