Correlation Between MKS Instruments and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both MKS Instruments 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 MKS Instruments and FARO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MKS Instruments and FARO Technologies, you can compare the effects of market volatilities on MKS Instruments 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 MKS Instruments with a short position of FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of MKS Instruments and FARO Technologies.
Diversification Opportunities for MKS Instruments and FARO Technologies
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MKS and FARO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding MKS Instruments and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and MKS Instruments 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 MKS Instruments 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 MKS Instruments i.e., MKS Instruments and FARO Technologies go up and down completely randomly.
Pair Corralation between MKS Instruments and FARO Technologies
Assuming the 90 days horizon MKS Instruments is expected to generate 2.89 times less return on investment than FARO Technologies. But when comparing it to its historical volatility, MKS Instruments is 1.33 times less risky than FARO Technologies. It trades about 0.03 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,390 in FARO Technologies on September 2, 2024 and sell it today you would earn a total of 1,090 from holding FARO Technologies or generate 78.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MKS Instruments vs. FARO Technologies
Performance |
| Timeline |
| MKS Instruments |
| FARO Technologies |
MKS Instruments and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MKS Instruments and FARO Technologies
The main advantage of trading using opposite MKS Instruments and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MKS Instruments 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.| MKS Instruments vs. UNIVERSAL MUSIC GROUP | MKS Instruments vs. Gaztransport Technigaz SA | MKS Instruments vs. DICKS Sporting Goods | MKS Instruments vs. USWE SPORTS AB |
| FARO Technologies vs. MTI WIRELESS EDGE | FARO Technologies vs. Gol Intelligent Airlines | FARO Technologies vs. Gamma Communications plc | FARO Technologies vs. Spirent Communications plc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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