Correlation Between Sono Tek and Spectris Plc

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

Diversification Opportunities for Sono Tek and Spectris Plc

-0.27

Correlation Coefficient

Sono Tek  Spectris Plc

Very good diversification

The 3 months correlation between Sono and Spectris is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Spectris plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectris plc 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 Spectris Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectris plc has no effect on the direction of Sono Tek i.e., Sono Tek and Spectris Plc go up and down completely randomly.

Pair Corralation between Sono Tek and Spectris Plc

Given the investment horizon of 90 days Sono Tek Corp is expected to under-perform the Spectris Plc. But the stock apears to be less risky and, when comparing its historical volatility, Sono Tek Corp is 1.33 times less risky than Spectris Plc. The stock trades about -0.08 of its potential returns per unit of risk. The Spectris plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,935  in Spectris plc on December 28, 2024 and sell it today you would earn a total of  179.00  from holding Spectris plc or generate 6.1% 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.  Spectris plc

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 uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Spectris plc

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Sono Tek and Spectris Plc

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

The idea behind Sono Tek Corp and Spectris plc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.