Correlation Between Sono Tek and Teledyne Technologies

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

Diversification Opportunities for Sono Tek and Teledyne Technologies

0.61

Correlation Coefficient

Sono Tek  Teledyne Technologies

Poor diversification

The 3 months correlation between Sono and Teledyne is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Teledyne Technologies Incorpor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teledyne Technologies 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 Teledyne Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teledyne Technologies has no effect on the direction of Sono Tek i.e., Sono Tek and Teledyne Technologies go up and down completely randomly.

Pair Corralation between Sono Tek and Teledyne Technologies

Given the investment horizon of 90 days Sono Tek is expected to generate 9.35 times less return on investment than Teledyne Technologies. In addition to that, Sono Tek is 2.2 times more volatile than Teledyne Technologies Incorporated. It trades about 0.01 of its total potential returns per unit of risk. Teledyne Technologies Incorporated is currently generating about 0.14 per unit of volatility. If you would invest  38,291  in Teledyne Technologies Incorporated on September 29, 2024 and sell it today you would earn a total of  8,853  from holding Teledyne Technologies Incorporated or generate 23.12% return on investment over 90 days.

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

Sono Tek Corp  vs.  Teledyne Technologies Incorpor

Sono Tek Corp

Risk-Adjusted Performance

1 of 100

Insignificant

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.

Teledyne Technologies

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teledyne Technologies Incorporated are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Teledyne Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sono Tek and Teledyne Technologies

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

The idea behind Sono Tek Corp and Teledyne Technologies Incorporated 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.