Correlation Between Cepton and Cognex

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

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

Diversification Opportunities for Cepton and Cognex

0.35

Correlation Coefficient

Cepton  Cognex

Weak diversification

The 3 months correlation between Cepton and Cognex is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Cepton Inc and Cognex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognex and Cepton 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 Cepton Inc 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 Cepton i.e., Cepton and Cognex go up and down completely randomly.

Pair Corralation between Cepton and Cognex

Given the investment horizon of 90 days Cepton Inc is expected to generate 0.26 times more return on investment than Cognex. However, Cepton Inc is 3.92 times less risky than Cognex. It trades about 0.13 of its potential returns per unit of risk. Cognex is currently generating about 0.02 per unit of risk. If you would invest  306.00  in Cepton Inc on September 5, 2024 and sell it today you would earn a total of  12.00  from holding Cepton Inc or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Cepton Inc  vs.  Cognex

Cepton Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cepton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cognex

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cognex are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Cognex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cepton and Cognex

The main advantage of trading using opposite Cepton and Cognex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cepton 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 Cepton Inc 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.