Correlation Between FARO Technologies and Sims Metal
Can any of the company-specific risk be diversified away by investing in both FARO Technologies and Sims Metal 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 Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and Sims Metal Management, you can compare the effects of market volatilities on FARO Technologies and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and Sims Metal.
Diversification Opportunities for FARO Technologies and Sims Metal
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between FARO and Sims is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of FARO Technologies i.e., FARO Technologies and Sims Metal go up and down completely randomly.
Pair Corralation between FARO Technologies and Sims Metal
Assuming the 90 days horizon FARO Technologies is expected to generate 0.86 times more return on investment than Sims Metal. However, FARO Technologies is 1.16 times less risky than Sims Metal. It trades about -0.12 of its potential returns per unit of risk. Sims Metal Management is currently generating about -0.15 per unit of risk. If you would invest 2,580 in FARO Technologies on September 24, 2024 and sell it today you would lose (140.00) from holding FARO Technologies or give up 5.43% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
FARO Technologies vs. Sims Metal Management
Performance |
Timeline |
FARO Technologies |
Sims Metal Management |
FARO Technologies and Sims Metal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with FARO Technologies and Sims Metal
The main advantage of trading using opposite FARO Technologies and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.FARO Technologies vs. Retail Estates NV | FARO Technologies vs. National Retail Properties | FARO Technologies vs. Caseys General Stores | FARO Technologies vs. AEON STORES |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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