Correlation Between FARO Technologies and Keysight Technologies

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

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

Diversification Opportunities for FARO Technologies and Keysight Technologies

0.69

Correlation Coefficient

FARO Technologies  Keysight Technologies

Poor diversification

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

Pair Corralation between FARO Technologies and Keysight Technologies

Given the investment horizon of 90 days FARO Technologies is expected to generate 2.63 times more return on investment than Keysight Technologies. However, FARO Technologies is 2.63 times more volatile than Keysight Technologies. It trades about 0.15 of its potential returns per unit of risk. Keysight Technologies is currently generating about 0.13 per unit of risk. If you would invest  1,735  in FARO Technologies on September 1, 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

FARO Technologies  vs.  Keysight Technologies

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 unsteady basic indicators, FARO Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Keysight Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keysight Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Keysight Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FARO Technologies and Keysight Technologies

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

The idea behind FARO Technologies and Keysight 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.