Correlation Between FARO Technologies and Focus Universal

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

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

Diversification Opportunities for FARO Technologies and Focus Universal

0.14

Correlation Coefficient

FARO Technologies  Focus Universal

Average diversification

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

Pair Corralation between FARO Technologies and Focus Universal

Given the investment horizon of 90 days FARO Technologies is expected to generate 12.33 times less return on investment than Focus Universal. But when comparing it to its historical volatility, FARO Technologies is 6.43 times less risky than Focus Universal. It trades about 0.07 of its potential returns per unit of risk. Focus Universal is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  223.00  in Focus Universal on December 19, 2024 and sell it today you would earn a total of  246.00  from holding Focus Universal or generate 110.31% return on investment over 90 days.

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

FARO Technologies  vs.  Focus Universal

FARO Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FARO Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, FARO Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Focus Universal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Universal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Focus Universal showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FARO Technologies and Focus Universal

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

The idea behind FARO Technologies and Focus Universal 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.