Correlation Between FARO Technologies and International Consolidated

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

By analyzing existing cross correlation between FARO Technologies and International Consolidated Airlines, you can compare the effects of market volatilities on FARO Technologies and International Consolidated 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 International Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and International Consolidated.

Diversification Opportunities for FARO Technologies and International Consolidated

0.88

Correlation Coefficient

FARO Technologies  International Consolidated

Very poor diversification

The 3 months correlation between FARO and International is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of FARO Technologies i.e., FARO Technologies and International Consolidated go up and down completely randomly.

Pair Corralation between FARO Technologies and International Consolidated

Assuming the 90 days horizon FARO Technologies is expected to generate 1.05 times less return on investment than International Consolidated. In addition to that, FARO Technologies is 2.37 times more volatile than International Consolidated Airlines. It trades about 0.1 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.25 per unit of volatility. If you would invest  197.00  in International Consolidated Airlines on September 23, 2024 and sell it today you would earn a total of  171.00  from holding International Consolidated Airlines or generate 86.8% return on investment over 90 days.

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

FARO Technologies  vs.  International Consolidated Air

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.

International Consolidated

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FARO Technologies and International Consolidated

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

The idea behind FARO Technologies and International Consolidated Airlines 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.