Correlation Between Sono Tek and Itron
Can any of the company-specific risk be diversified away by investing in both Sono Tek and Itron 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 Itron 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 Itron Inc, you can compare the effects of market volatilities on Sono Tek and Itron 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 Itron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sono Tek and Itron.
Diversification Opportunities for Sono Tek and Itron
Weak diversification
The 3 months correlation between Sono and Itron is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Itron Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itron Inc 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 Itron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itron Inc has no effect on the direction of Sono Tek i.e., Sono Tek and Itron go up and down completely randomly.
Pair Corralation between Sono Tek and Itron
Given the investment horizon of 90 days Sono Tek is expected to generate 3.52 times less return on investment than Itron. But when comparing it to its historical volatility, Sono Tek Corp is 1.15 times less risky than Itron. It trades about 0.09 of its potential returns per unit of risk. Itron Inc is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 10,236 in Itron Inc on August 24, 2024 and sell it today you would earn a total of 1,401 from holding Itron Inc or generate 13.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sono Tek Corp vs. Itron Inc
Performance |
| Timeline |
| Sono Tek Corp |
| Itron Inc |
Sono Tek and Itron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sono Tek and Itron
The main advantage of trading using opposite Sono Tek and Itron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sono Tek position performs unexpectedly, Itron 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 Itron will offset losses from the drop in Itron's long position.| 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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