Correlation Between Cognex and Coherent

Can any of the company-specific risk be diversified away by investing in both Cognex and Coherent 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 Cognex and Coherent into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cognex and Coherent, you can compare the effects of market volatilities on Cognex and Coherent 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 Cognex with a short position of Coherent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognex and Coherent.

Diversification Opportunities for Cognex and Coherent

0.81

Correlation Coefficient

Cognex  Coherent

Very poor diversification

The 3 months correlation between Cognex and Coherent is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cognex and Coherent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coherent and Cognex 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 Cognex are associated (or correlated) with Coherent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coherent has no effect on the direction of Cognex i.e., Cognex and Coherent go up and down completely randomly.

Pair Corralation between Cognex and Coherent

Given the investment horizon of 90 days Cognex is expected to generate 0.5 times more return on investment than Coherent. However, Cognex is 1.98 times less risky than Coherent. It trades about -0.09 of its potential returns per unit of risk. Coherent is currently generating about -0.09 per unit of risk. If you would invest  3,558  in Cognex on December 29, 2024 and sell it today you would lose (557.00) from holding Cognex or give up 15.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Cognex  vs.  Coherent

Cognex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Coherent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Coherent has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Cognex and Coherent

The main advantage of trading using opposite Cognex and Coherent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognex position performs unexpectedly, Coherent 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 Coherent will offset losses from the drop in Coherent's long position.

The idea behind Cognex and Coherent 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.