Correlation Between FARO Technologies and NTG Nordic

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

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

Diversification Opportunities for FARO Technologies and NTG Nordic

-0.44

Correlation Coefficient

FARO Technologies  NTG Nordic

Very good diversification

The 3 months correlation between FARO and NTG is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and NTG Nordic Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTG Nordic Transport 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 NTG Nordic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTG Nordic Transport has no effect on the direction of FARO Technologies i.e., FARO Technologies and NTG Nordic go up and down completely randomly.

Pair Corralation between FARO Technologies and NTG Nordic

Assuming the 90 days horizon FARO Technologies is expected to generate 2.5 times more return on investment than NTG Nordic. However, FARO Technologies is 2.5 times more volatile than NTG Nordic Transport. It trades about 0.18 of its potential returns per unit of risk. NTG Nordic Transport is currently generating about -0.06 per unit of risk. If you would invest  1,570  in FARO Technologies on September 18, 2024 and sell it today you would earn a total of  1,030  from holding FARO Technologies or generate 65.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FARO Technologies  vs.  NTG Nordic Transport

FARO Technologies

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FARO Technologies are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FARO Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

NTG Nordic Transport

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NTG Nordic Transport has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with FARO Technologies and NTG Nordic

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

The idea behind FARO Technologies and NTG Nordic Transport 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.