Correlation Between Willamette Valley and FARO Technologies

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

By analyzing existing cross correlation between Willamette Valley Vineyards and FARO Technologies, you can compare the effects of market volatilities on Willamette Valley and FARO 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 Willamette Valley with a short position of FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Willamette Valley and FARO Technologies.

Diversification Opportunities for Willamette Valley and FARO Technologies

-0.69

Correlation Coefficient

Willamette Valley  FARO Technologies

Excellent diversification

The 3 months correlation between Willamette and FARO is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and Willamette Valley 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 Willamette Valley Vineyards are associated (or correlated) with FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of Willamette Valley i.e., Willamette Valley and FARO Technologies go up and down completely randomly.

Pair Corralation between Willamette Valley and FARO Technologies

Given the investment horizon of 90 days Willamette Valley Vineyards is expected to under-perform the FARO Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Willamette Valley Vineyards is 2.82 times less risky than FARO Technologies. The stock trades about -0.09 of its potential returns per unit of risk. The FARO Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,735  in FARO Technologies on September 3, 2024 and sell it today you would earn a total of  890.00  from holding FARO Technologies or generate 51.3% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  FARO Technologies

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

FARO Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FARO Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, FARO Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and FARO Technologies

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

The idea behind Willamette Valley Vineyards and FARO Technologies 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.