Correlation Between MKS Instruments and Sono Tek

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

By analyzing existing cross correlation between MKS Instruments and Sono Tek Corp, you can compare the effects of market volatilities on MKS Instruments and Sono Tek 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 MKS Instruments with a short position of Sono Tek. Check out your portfolio center. Please also check ongoing floating volatility patterns of MKS Instruments and Sono Tek.

Diversification Opportunities for MKS Instruments and Sono Tek

0.38

Correlation Coefficient

MKS Instruments  Sono Tek

Weak diversification

The 3 months correlation between MKS and Sono is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MKS Instruments and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp and MKS Instruments 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 MKS Instruments are associated (or correlated) with Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of MKS Instruments i.e., MKS Instruments and Sono Tek go up and down completely randomly.

Pair Corralation between MKS Instruments and Sono Tek

Given the investment horizon of 90 days MKS Instruments is expected to generate 21.91 times less return on investment than Sono Tek. But when comparing it to its historical volatility, MKS Instruments is 1.04 times less risky than Sono Tek. It trades about 0.0 of its potential returns per unit of risk. Sono Tek Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  403.00  in Sono Tek Corp on September 29, 2024 and sell it today you would earn a total of  2.00  from holding Sono Tek Corp or generate 0.5% return on investment over 90 days.

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

MKS Instruments  vs.  Sono Tek Corp

MKS Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MKS Instruments is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Sono Tek Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sono Tek Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sono Tek is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with MKS Instruments and Sono Tek

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

The idea behind MKS Instruments and Sono Tek Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.