Correlation Between Sono Tek and Teledyne Technologies
Can any of the company-specific risk be diversified away by investing in both Sono Tek and Teledyne 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 Sono Tek and Teledyne Technologies 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 Teledyne Technologies Incorporated, you can compare the effects of market volatilities on Sono Tek and Teledyne 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 Sono Tek with a short position of Teledyne Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sono Tek and Teledyne Technologies.
Diversification Opportunities for Sono Tek and Teledyne Technologies
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sono and Teledyne is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies 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 Teledyne Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teledyne Technologies has no effect on the direction of Sono Tek i.e., Sono Tek and Teledyne Technologies go up and down completely randomly.
Pair Corralation between Sono Tek and Teledyne Technologies
Given the investment horizon of 90 days Sono Tek Corp is expected to generate 1.75 times more return on investment than Teledyne Technologies. However, Sono Tek is 1.75 times more volatile than Teledyne Technologies Incorporated. It trades about 0.08 of its potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.14 per unit of risk. If you would invest 415.00 in Sono Tek Corp on August 28, 2024 and sell it today you would earn a total of 47.00 from holding Sono Tek Corp or generate 11.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sono Tek Corp vs. Teledyne Technologies Incorpor
Performance |
| Timeline |
| Sono Tek Corp |
| Teledyne Technologies |
Sono Tek and Teledyne Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sono Tek and Teledyne Technologies
The main advantage of trading using opposite Sono Tek and Teledyne Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sono Tek position performs unexpectedly, Teledyne 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 Teledyne Technologies will offset losses from the drop in Teledyne Technologies' long position.The idea behind Sono Tek Corp and Teledyne Technologies Incorporated 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.| Teledyne Technologies vs. Vontier Corp | Teledyne Technologies vs. ESCO Technologies | Teledyne Technologies vs. MKS Instruments | Teledyne Technologies 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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