Correlation Between FARO Technologies and VOLKSWAGEN

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

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

Diversification Opportunities for FARO Technologies and VOLKSWAGEN

0.13

Correlation Coefficient

FARO Technologies  VOLKSWAGEN

Average diversification

The 3 months correlation between FARO and VOLKSWAGEN is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and VOLKSWAGEN AG VZ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VOLKSWAGEN AG VZ 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 VOLKSWAGEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VOLKSWAGEN AG VZ has no effect on the direction of FARO Technologies i.e., FARO Technologies and VOLKSWAGEN go up and down completely randomly.

Pair Corralation between FARO Technologies and VOLKSWAGEN

Assuming the 90 days horizon FARO Technologies is expected to generate 1.06 times less return on investment than VOLKSWAGEN. In addition to that, FARO Technologies is 1.94 times more volatile than VOLKSWAGEN AG VZ. It trades about 0.04 of its total potential returns per unit of risk. VOLKSWAGEN AG VZ is currently generating about 0.09 per unit of volatility. If you would invest  890.00  in VOLKSWAGEN AG VZ on December 30, 2024 and sell it today you would earn a total of  100.00  from holding VOLKSWAGEN AG VZ or generate 11.24% 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.  VOLKSWAGEN AG VZ

FARO Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FARO Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FARO Technologies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

VOLKSWAGEN AG VZ

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VOLKSWAGEN AG VZ are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VOLKSWAGEN may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FARO Technologies and VOLKSWAGEN

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

The idea behind FARO Technologies and VOLKSWAGEN AG VZ 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.