Correlation Between THORNEY TECHS and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both THORNEY TECHS 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 THORNEY TECHS and FARO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THORNEY TECHS LTD and FARO Technologies, you can compare the effects of market volatilities on THORNEY TECHS 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 THORNEY TECHS with a short position of FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of THORNEY TECHS and FARO Technologies.
Diversification Opportunities for THORNEY TECHS and FARO Technologies
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between THORNEY and FARO is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding THORNEY TECHS LTD and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and THORNEY TECHS 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 THORNEY TECHS LTD 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 THORNEY TECHS i.e., THORNEY TECHS and FARO Technologies go up and down completely randomly.
Pair Corralation between THORNEY TECHS and FARO Technologies
Assuming the 90 days horizon THORNEY TECHS is expected to generate 3.29 times less return on investment than FARO Technologies. But when comparing it to its historical volatility, THORNEY TECHS LTD is 1.07 times less risky than FARO Technologies. It trades about 0.05 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,610 in FARO Technologies on November 2, 2024 and sell it today you would earn a total of 1,330 from holding FARO Technologies or generate 82.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
THORNEY TECHS LTD vs. FARO Technologies
Performance |
| Timeline |
| THORNEY TECHS LTD |
| FARO Technologies |
THORNEY TECHS and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THORNEY TECHS and FARO Technologies
The main advantage of trading using opposite THORNEY TECHS and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THORNEY TECHS 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.| THORNEY TECHS vs. Aya Gold Silver | THORNEY TECHS vs. STGEORGE MINING LTD | THORNEY TECHS vs. Monument Mining Limited | THORNEY TECHS vs. Eurasia Mining Plc |
| FARO Technologies vs. Lendlease Group | FARO Technologies vs. ETFS Coffee ETC | FARO Technologies vs. Global Ship Lease | FARO Technologies vs. Tradeweb Markets |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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