Correlation Between Cepton and Vontier Corp

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

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

Diversification Opportunities for Cepton and Vontier Corp

0.37

Correlation Coefficient

Cepton  Vontier Corp

Weak diversification

The 3 months correlation between Cepton and Vontier is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cepton Inc and Vontier Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vontier Corp 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 Vontier Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vontier Corp has no effect on the direction of Cepton i.e., Cepton and Vontier Corp go up and down completely randomly.

Pair Corralation between Cepton and Vontier Corp

Given the investment horizon of 90 days Cepton is expected to generate 2.45 times less return on investment than Vontier Corp. But when comparing it to its historical volatility, Cepton Inc is 3.7 times less risky than Vontier Corp. It trades about 0.15 of its potential returns per unit of risk. Vontier Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,325  in Vontier Corp on September 24, 2024 and sell it today you would earn a total of  357.00  from holding Vontier Corp or generate 10.74% return on investment over 90 days.

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

Cepton Inc  vs.  Vontier Corp

Cepton Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 11 (%) 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 newest stock price disarray, may contribute to short-term losses for the investors.

Vontier Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vontier Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Vontier Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cepton and Vontier Corp

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

The idea behind Cepton Inc and Vontier 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.