Correlation Between Sono Tek and Focus Universal

Can any of the company-specific risk be diversified away by investing in both Sono Tek and Focus Universal 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 Focus Universal 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 Focus Universal, you can compare the effects of market volatilities on Sono Tek and Focus Universal 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 Focus Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sono Tek and Focus Universal.

Diversification Opportunities for Sono Tek and Focus Universal

0.17

Correlation Coefficient

Sono Tek  Focus Universal

Average diversification

The 3 months correlation between Sono and Focus is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Focus Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Universal 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 Focus Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Universal has no effect on the direction of Sono Tek i.e., Sono Tek and Focus Universal go up and down completely randomly.

Pair Corralation between Sono Tek and Focus Universal

Given the investment horizon of 90 days Sono Tek Corp is expected to under-perform the Focus Universal. But the stock apears to be less risky and, when comparing its historical volatility, Sono Tek Corp is 10.0 times less risky than Focus Universal. The stock trades about -0.07 of its potential returns per unit of risk. The Focus Universal is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  485.00  in Focus Universal on December 28, 2024 and sell it today you would lose (5.00) from holding Focus Universal or give up 1.03% of portfolio value over 90 days.

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

Sono Tek Corp  vs.  Focus Universal

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.

Focus Universal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Universal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Focus Universal showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sono Tek and Focus Universal

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

The idea behind Sono Tek Corp and Focus Universal 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.