Correlation Between FARO Technologies and Russel Metals
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and Russel Metals 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 Russel Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and Russel Metals, you can compare the effects of market volatilities on FARO Technologies and Russel Metals 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 Russel Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and Russel Metals.
Diversification Opportunities for FARO Technologies and Russel Metals
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FARO and Russel is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Russel Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russel Metals 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 Russel Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russel Metals has no effect on the direction of FARO Technologies i.e., FARO Technologies and Russel Metals go up and down completely randomly.
Pair Corralation between FARO Technologies and Russel Metals
Assuming the 90 days horizon FARO Technologies is expected to generate 6.1 times more return on investment than Russel Metals. However, FARO Technologies is 6.1 times more volatile than Russel Metals. It trades about 0.25 of its potential returns per unit of risk. Russel Metals is currently generating about -0.19 per unit of risk. If you would invest 2,500 in FARO Technologies on October 22, 2024 and sell it today you would earn a total of 580.00 from holding FARO Technologies or generate 23.2% 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. Russel Metals
Performance |
| Timeline |
| FARO Technologies |
| Russel Metals |
FARO Technologies and Russel Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and Russel Metals
The main advantage of trading using opposite FARO Technologies and Russel Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, Russel Metals 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 Russel Metals will offset losses from the drop in Russel Metals' long position.| FARO Technologies vs. MHP Hotel AG | FARO Technologies vs. Park Hotels Resorts | FARO Technologies vs. Host Hotels Resorts | FARO Technologies vs. Golden Entertainment |
| Russel Metals vs. MEDCAW INVESTMENTS LS 01 | Russel Metals vs. Heidelberg Materials AG | Russel Metals vs. MidCap Financial Investment | Russel Metals vs. Japan Asia Investment |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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