Correlation Between Sono Tek and Safeplus International

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

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

Diversification Opportunities for Sono Tek and Safeplus International

-0.33

Correlation Coefficient

Sono Tek  Safeplus International

Very good diversification

The 3 months correlation between Sono and Safeplus is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Safeplus International Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safeplus International and Sono Tek 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 Sono Tek Corp are associated (or correlated) with Safeplus International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safeplus International has no effect on the direction of Sono Tek i.e., Sono Tek and Safeplus International go up and down completely randomly.

Pair Corralation between Sono Tek and Safeplus International

Given the investment horizon of 90 days Sono Tek Corp is expected to under-perform the Safeplus International. In addition to that, Sono Tek is 1.69 times more volatile than Safeplus International Holdings. It trades about -0.06 of its total potential returns per unit of risk. Safeplus International Holdings is currently generating about 0.06 per unit of volatility. If you would invest  1,667  in Safeplus International Holdings on December 28, 2024 and sell it today you would earn a total of  79.00  from holding Safeplus International Holdings or generate 4.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Sono Tek Corp  vs.  Safeplus International Holding

Sono Tek Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sono Tek Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Safeplus International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Safeplus International Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Safeplus International is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Sono Tek and Safeplus International

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

The idea behind Sono Tek Corp and Safeplus International Holdings 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.