Correlation Between Fortive and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both Fortive 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 Fortive and FARO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortive and FARO Technologies, you can compare the effects of market volatilities on Fortive 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 Fortive with a short position of FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortive and FARO Technologies.
Diversification Opportunities for Fortive and FARO Technologies
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fortive and FARO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fortive and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and Fortive 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 Fortive 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 Fortive i.e., Fortive and FARO Technologies go up and down completely randomly.
Pair Corralation between Fortive and FARO Technologies
Assuming the 90 days horizon Fortive is expected to generate 11.4 times less return on investment than FARO Technologies. But when comparing it to its historical volatility, Fortive is 3.85 times less risky than FARO Technologies. It trades about 0.03 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,480 in FARO Technologies on December 2, 2024 and sell it today you would earn a total of 540.00 from holding FARO Technologies or generate 21.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Fortive vs. FARO Technologies
Performance |
Timeline |
Fortive |
FARO Technologies |
Fortive and FARO Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fortive and FARO Technologies
The main advantage of trading using opposite Fortive and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortive 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.Fortive vs. Virtu Financial | Fortive vs. WT OFFSHORE | Fortive vs. PT Bank Maybank | Fortive vs. NXP Semiconductors NV |
FARO Technologies vs. FLOW TRADERS LTD | FARO Technologies vs. FAST RETAIL ADR | FARO Technologies vs. TRADEGATE | FARO Technologies vs. GOME Retail Holdings |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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