Correlation Between Itron and Sono Tek
Can any of the company-specific risk be diversified away by investing in both Itron and Sono Tek 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 Itron and Sono Tek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Itron Inc and Sono Tek Corp, you can compare the effects of market volatilities on Itron and Sono Tek 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 Itron with a short position of Sono Tek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itron and Sono Tek.
Diversification Opportunities for Itron and Sono Tek
Very weak diversification
The 3 months correlation between Itron and Sono is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Itron Inc and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp and Itron 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 Itron Inc are associated (or correlated) with Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of Itron i.e., Itron and Sono Tek go up and down completely randomly.
Pair Corralation between Itron and Sono Tek
Given the investment horizon of 90 days Itron Inc is expected to generate 0.53 times more return on investment than Sono Tek. However, Itron Inc is 1.88 times less risky than Sono Tek. It trades about -0.03 of its potential returns per unit of risk. Sono Tek Corp is currently generating about -0.19 per unit of risk. If you would invest 10,853 in Itron Inc on November 3, 2024 and sell it today you would lose (117.00) from holding Itron Inc or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Itron Inc vs. Sono Tek Corp
Performance |
| Timeline |
| Itron Inc |
| Sono Tek Corp |
Itron and Sono Tek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itron and Sono Tek
The main advantage of trading using opposite Itron and Sono Tek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itron position performs unexpectedly, Sono Tek 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 Sono Tek will offset losses from the drop in Sono Tek's long position.The idea behind Itron Inc and Sono Tek Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sono Tek vs. Novanta | Sono Tek vs. ESCO Technologies | Sono Tek vs. Vontier Corp | Sono Tek vs. Sensata Technologies Holding |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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