Correlation Between Track and Sono Tek

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

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

Diversification Opportunities for Track and Sono Tek

-0.62

Correlation Coefficient

Track  Sono Tek

Excellent diversification

The 3 months correlation between Track and Sono is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Track Group and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp and Track 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 Track Group are associated (or correlated) with Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of Track i.e., Track and Sono Tek go up and down completely randomly.

Pair Corralation between Track and Sono Tek

Given the investment horizon of 90 days Track Group is expected to generate 2.87 times more return on investment than Sono Tek. However, Track is 2.87 times more volatile than Sono Tek Corp. It trades about 0.16 of its potential returns per unit of risk. Sono Tek Corp is currently generating about -0.06 per unit of risk. If you would invest  15.00  in Track Group on December 24, 2024 and sell it today you would earn a total of  11.00  from holding Track Group or generate 73.33% return on investment over 90 days.

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

Track Group  vs.  Sono Tek Corp

Track Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Track Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental indicators, Track disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Track and Sono Tek

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

The idea behind Track Group and Sono Tek Corp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.