Correlation Between CompuGroup Medical and FARO Technologies

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

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

Diversification Opportunities for CompuGroup Medical and FARO Technologies

0.66

Correlation Coefficient

CompuGroup Medical  FARO Technologies

Poor diversification

The 3 months correlation between CompuGroup and FARO is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CompuGroup Medical SE and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and CompuGroup Medical 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 CompuGroup Medical SE 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 CompuGroup Medical i.e., CompuGroup Medical and FARO Technologies go up and down completely randomly.

Pair Corralation between CompuGroup Medical and FARO Technologies

Assuming the 90 days trading horizon CompuGroup Medical SE is expected to generate 3.35 times more return on investment than FARO Technologies. However, CompuGroup Medical is 3.35 times more volatile than FARO Technologies. It trades about 0.3 of its potential returns per unit of risk. FARO Technologies is currently generating about -0.04 per unit of risk. If you would invest  1,405  in CompuGroup Medical SE on September 23, 2024 and sell it today you would earn a total of  769.00  from holding CompuGroup Medical SE or generate 54.73% return on investment over 90 days.

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

CompuGroup Medical SE  vs.  FARO Technologies

CompuGroup Medical

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CompuGroup Medical SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, CompuGroup Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

FARO Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FARO Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FARO Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CompuGroup Medical and FARO Technologies

The main advantage of trading using opposite CompuGroup Medical and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompuGroup Medical 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.

The idea behind CompuGroup Medical SE and FARO 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.