Correlation Between Sono Tek and Trimble

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

Diversification Opportunities for Sono Tek and Trimble

0.72

Correlation Coefficient

Sono Tek  Trimble

Poor diversification

The 3 months correlation between Sono and Trimble is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Trimble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trimble 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 Trimble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trimble has no effect on the direction of Sono Tek i.e., Sono Tek and Trimble go up and down completely randomly.

Pair Corralation between Sono Tek and Trimble

Given the investment horizon of 90 days Sono Tek Corp is expected to under-perform the Trimble. In addition to that, Sono Tek is 1.45 times more volatile than Trimble. It trades about -0.02 of its total potential returns per unit of risk. Trimble is currently generating about 0.07 per unit of volatility. If you would invest  5,320  in Trimble on September 24, 2024 and sell it today you would earn a total of  1,800  from holding Trimble or generate 33.83% 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.  Trimble

Sono Tek Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sono Tek Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Sono Tek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Trimble

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal primary indicators, Trimble sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sono Tek and Trimble

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

The idea behind Sono Tek Corp and Trimble 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.