Correlation Between FARO Technologies and ConocoPhillips
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and ConocoPhillips 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 ConocoPhillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and ConocoPhillips, you can compare the effects of market volatilities on FARO Technologies and ConocoPhillips 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 ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and ConocoPhillips.
Diversification Opportunities for FARO Technologies and ConocoPhillips
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FARO and ConocoPhillips is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of FARO Technologies i.e., FARO Technologies and ConocoPhillips go up and down completely randomly.
Pair Corralation between FARO Technologies and ConocoPhillips
Assuming the 90 days horizon FARO Technologies is expected to generate 4.13 times more return on investment than ConocoPhillips. However, FARO Technologies is 4.13 times more volatile than ConocoPhillips. It trades about 0.29 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.11 per unit of risk. If you would invest 1,610 in FARO Technologies on September 4, 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 | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
FARO Technologies vs. ConocoPhillips
Performance |
| Timeline |
| FARO Technologies |
| ConocoPhillips |
FARO Technologies and ConocoPhillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and ConocoPhillips
The main advantage of trading using opposite FARO Technologies and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' 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 |
| ConocoPhillips vs. Alibaba Group Holding | ConocoPhillips vs. Occidental Petroleum | ConocoPhillips vs. WOODSIDE ENE SPADR | ConocoPhillips vs. Woodside Energy Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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