Correlation Between Golden Entertainment and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both Golden Entertainment and FARO Technologies 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 Golden Entertainment and FARO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Entertainment and FARO Technologies, you can compare the effects of market volatilities on Golden Entertainment and FARO Technologies 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 Golden Entertainment with a short position of FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Entertainment and FARO Technologies.
Diversification Opportunities for Golden Entertainment and FARO Technologies
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Golden and FARO is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Golden Entertainment and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and Golden Entertainment 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 Golden Entertainment are associated (or correlated) with FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of Golden Entertainment i.e., Golden Entertainment and FARO Technologies go up and down completely randomly.
Pair Corralation between Golden Entertainment and FARO Technologies
Assuming the 90 days horizon Golden Entertainment is expected to generate 5.2 times less return on investment than FARO Technologies. But when comparing it to its historical volatility, Golden Entertainment is 4.23 times less risky than FARO Technologies. It trades about 0.16 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,440 in FARO Technologies on November 3, 2024 and sell it today you would earn a total of 500.00 from holding FARO Technologies or generate 20.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golden Entertainment vs. FARO Technologies
Performance |
| Timeline |
| Golden Entertainment |
| FARO Technologies |
Golden Entertainment and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golden Entertainment and FARO Technologies
The main advantage of trading using opposite Golden Entertainment and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Entertainment position performs unexpectedly, FARO Technologies 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 FARO Technologies will offset losses from the drop in FARO Technologies' long position.| Golden Entertainment vs. Citic Telecom International | Golden Entertainment vs. Singapore Telecommunications Limited | Golden Entertainment vs. Tyson Foods | Golden Entertainment vs. CN MODERN DAIRY |
| FARO Technologies vs. Iridium Communications | FARO Technologies vs. AWILCO DRILLING PLC | FARO Technologies vs. Kingdee International Software | FARO Technologies vs. Singapore Telecommunications Limited |
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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