Correlation Between FARO Technologies and Universal Display
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and Universal Display 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 Universal Display into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and Universal Display, you can compare the effects of market volatilities on FARO Technologies and Universal Display 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 Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and Universal Display.
Diversification Opportunities for FARO Technologies and Universal Display
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FARO and Universal is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display 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 Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display has no effect on the direction of FARO Technologies i.e., FARO Technologies and Universal Display go up and down completely randomly.
Pair Corralation between FARO Technologies and Universal Display
Assuming the 90 days horizon FARO Technologies is expected to generate 1.46 times more return on investment than Universal Display. However, FARO Technologies is 1.46 times more volatile than Universal Display. It trades about 0.05 of its potential returns per unit of risk. Universal Display is currently generating about 0.01 per unit of risk. If you would invest 1,780 in FARO Technologies on September 4, 2024 and sell it today you would earn a total of 740.00 from holding FARO Technologies or generate 41.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. Universal Display
Performance |
| Timeline |
| FARO Technologies |
| Universal Display |
FARO Technologies and Universal Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and Universal Display
The main advantage of trading using opposite FARO Technologies and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, Universal Display 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 Universal Display will offset losses from the drop in Universal Display's long position.| FARO Technologies vs. Darden Restaurants | FARO Technologies vs. Sumitomo Mitsui Construction | FARO Technologies vs. Vastned Retail NV | FARO Technologies vs. PICKN PAY STORES |
| Universal Display vs. ASML HOLDING NY | Universal Display vs. ASML Holding NV | Universal Display vs. ASML Holding NV | Universal Display vs. Lam Research |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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