Correlation Between Cognex and Keysight Technologies

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

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

Diversification Opportunities for Cognex and Keysight Technologies

-0.14

Correlation Coefficient

Cognex  Keysight Technologies

Good diversification

The 3 months correlation between Cognex and Keysight is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cognex and Keysight Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keysight Technologies 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 Keysight Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keysight Technologies has no effect on the direction of Cognex i.e., Cognex and Keysight Technologies go up and down completely randomly.

Pair Corralation between Cognex and Keysight Technologies

Given the investment horizon of 90 days Cognex is expected to under-perform the Keysight Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Cognex is 1.01 times less risky than Keysight Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The Keysight Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  15,751  in Keysight Technologies on October 10, 2024 and sell it today you would earn a total of  862.00  from holding Keysight Technologies or generate 5.47% return on investment over 90 days.

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

Cognex  vs.  Keysight Technologies

Cognex

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Cognex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Keysight Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keysight Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Keysight Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Cognex and Keysight Technologies

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

The idea behind Cognex and Keysight Technologies 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.