Correlation Between FARO Technologies and DAIRY FARM
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and DAIRY FARM 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 DAIRY FARM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and DAIRY FARM INTL, you can compare the effects of market volatilities on FARO Technologies and DAIRY FARM 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 DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and DAIRY FARM.
Diversification Opportunities for FARO Technologies and DAIRY FARM
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FARO and DAIRY is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of FARO Technologies i.e., FARO Technologies and DAIRY FARM go up and down completely randomly.
Pair Corralation between FARO Technologies and DAIRY FARM
Assuming the 90 days horizon FARO Technologies is expected to generate 1.2 times more return on investment than DAIRY FARM. However, FARO Technologies is 1.2 times more volatile than DAIRY FARM INTL. It trades about 0.22 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about -0.16 per unit of risk. If you would invest 2,380 in FARO Technologies on September 20, 2024 and sell it today you would earn a total of 240.00 from holding FARO Technologies or generate 10.08% 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. DAIRY FARM INTL
Performance |
| Timeline |
| FARO Technologies |
| DAIRY FARM INTL |
FARO Technologies and DAIRY FARM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and DAIRY FARM
The main advantage of trading using opposite FARO Technologies and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.| FARO Technologies vs. Guidewire Software | FARO Technologies vs. Australian Agricultural | FARO Technologies vs. Hanison Construction Holdings | FARO Technologies vs. CyberArk Software |
| DAIRY FARM vs. Axcelis Technologies | DAIRY FARM vs. FARO Technologies | DAIRY FARM vs. ORMAT TECHNOLOGIES | DAIRY FARM vs. GLG LIFE TECH |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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