Correlation Between Keysight Technologies and Cognex

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

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

Diversification Opportunities for Keysight Technologies and Cognex

0.23

Correlation Coefficient

Keysight Technologies  Cognex

Modest diversification

The 3 months correlation between Keysight and Cognex is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Keysight Technologies and Cognex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognex and Keysight Technologies 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 Keysight Technologies are associated (or correlated) with Cognex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognex has no effect on the direction of Keysight Technologies i.e., Keysight Technologies and Cognex go up and down completely randomly.

Pair Corralation between Keysight Technologies and Cognex

Assuming the 90 days horizon Keysight Technologies is expected to generate 1.05 times more return on investment than Cognex. However, Keysight Technologies is 1.05 times more volatile than Cognex. It trades about 0.09 of its potential returns per unit of risk. Cognex is currently generating about -0.03 per unit of risk. If you would invest  14,116  in Keysight Technologies on September 27, 2024 and sell it today you would earn a total of  1,456  from holding Keysight Technologies or generate 10.31% return on investment over 90 days.

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

Keysight Technologies  vs.  Cognex

Keysight Technologies

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keysight Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Keysight Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cognex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cognex is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Keysight Technologies and Cognex

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

The idea behind Keysight Technologies and Cognex 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.