Correlation Between FARO Technologies and Dow Jones
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and Dow Jones 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 Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and Dow Jones Industrial, you can compare the effects of market volatilities on FARO Technologies and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and Dow Jones.
Diversification Opportunities for FARO Technologies and Dow Jones
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FARO and Dow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of FARO Technologies i.e., FARO Technologies and Dow Jones go up and down completely randomly.
Pair Corralation between FARO Technologies and Dow Jones
Assuming the 90 days horizon FARO Technologies is expected to generate 1.06 times less return on investment than Dow Jones. In addition to that, FARO Technologies is 5.56 times more volatile than Dow Jones Industrial. It trades about 0.01 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.08 per unit of volatility. If you would invest 3,378,148 in Dow Jones Industrial on August 29, 2024 and sell it today you would earn a total of 1,094,058 from holding Dow Jones Industrial or generate 32.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.22% |
| Values | Daily Returns |
FARO Technologies vs. Dow Jones Industrial
Performance |
| Timeline |
FARO Technologies and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
FARO Technologies
Pair trading matchups for FARO Technologies
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with FARO Technologies and Dow Jones
The main advantage of trading using opposite FARO Technologies and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| FARO Technologies vs. LION ONE METALS | FARO Technologies vs. Chongqing Machinery Electric | FARO Technologies vs. Sumitomo Mitsui Construction | FARO Technologies vs. Perseus Mining Limited |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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