Correlation Between Sono Tek and Electro Sensors
Can any of the company-specific risk be diversified away by investing in both Sono Tek and Electro Sensors 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 Sono Tek and Electro Sensors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sono Tek Corp and Electro Sensors, you can compare the effects of market volatilities on Sono Tek and Electro Sensors 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 Sono Tek with a short position of Electro Sensors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sono Tek and Electro Sensors.
Diversification Opportunities for Sono Tek and Electro Sensors
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sono and Electro is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Electro Sensors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electro Sensors and Sono Tek 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 Sono Tek Corp are associated (or correlated) with Electro Sensors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electro Sensors has no effect on the direction of Sono Tek i.e., Sono Tek and Electro Sensors go up and down completely randomly.
Pair Corralation between Sono Tek and Electro Sensors
Given the investment horizon of 90 days Sono Tek Corp is expected to under-perform the Electro Sensors. In addition to that, Sono Tek is 1.26 times more volatile than Electro Sensors. It trades about -0.01 of its total potential returns per unit of risk. Electro Sensors is currently generating about -0.01 per unit of volatility. If you would invest 495.00 in Electro Sensors on August 24, 2024 and sell it today you would lose (73.00) from holding Electro Sensors or give up 14.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 92.74% |
| Values | Daily Returns |
Sono Tek Corp vs. Electro Sensors
Performance |
| Timeline |
| Sono Tek Corp |
| Electro Sensors |
Sono Tek and Electro Sensors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sono Tek and Electro Sensors
The main advantage of trading using opposite Sono Tek and Electro Sensors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sono Tek position performs unexpectedly, Electro Sensors 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 Electro Sensors will offset losses from the drop in Electro Sensors' long position.| Sono Tek vs. Novanta | Sono Tek vs. ESCO Technologies | Sono Tek vs. Vontier Corp | Sono Tek vs. Sensata Technologies Holding |
| Electro Sensors vs. Sono Tek Corp | Electro Sensors vs. Vishay Precision Group | Electro Sensors vs. Keyence | Electro Sensors vs. Luna Innovations Incorporated |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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