Correlation Between Cognex and MKS Instruments

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

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

Diversification Opportunities for Cognex and MKS Instruments

0.13

Correlation Coefficient

Cognex  MKS Instruments

Average diversification

The 3 months correlation between Cognex and MKS is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cognex and MKS Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MKS Instruments and Cognex 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 Cognex are associated (or correlated) with MKS Instruments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MKS Instruments has no effect on the direction of Cognex i.e., Cognex and MKS Instruments go up and down completely randomly.

Pair Corralation between Cognex and MKS Instruments

Given the investment horizon of 90 days Cognex is expected to under-perform the MKS Instruments. But the stock apears to be less risky and, when comparing its historical volatility, Cognex is 1.57 times less risky than MKS Instruments. The stock trades about -0.01 of its potential returns per unit of risk. The MKS Instruments is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  10,515  in MKS Instruments on August 30, 2024 and sell it today you would earn a total of  800.00  from holding MKS Instruments or generate 7.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Cognex  vs.  MKS Instruments

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. In spite of fairly strong basic indicators, Cognex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

MKS Instruments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MKS Instruments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, MKS Instruments is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cognex and MKS Instruments

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

The idea behind Cognex and MKS Instruments 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.