Correlation Between FARO Technologies and VANADIUMCORP RES

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

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

Diversification Opportunities for FARO Technologies and VANADIUMCORP RES

-0.09

Correlation Coefficient

FARO Technologies  VANADIUMCORP RES

Good diversification

The 3 months correlation between FARO and VANADIUMCORP is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and VANADIUMCORP RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VANADIUMCORP RES 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 VANADIUMCORP RES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VANADIUMCORP RES has no effect on the direction of FARO Technologies i.e., FARO Technologies and VANADIUMCORP RES go up and down completely randomly.

Pair Corralation between FARO Technologies and VANADIUMCORP RES

Assuming the 90 days horizon FARO Technologies is expected to generate 7.63 times less return on investment than VANADIUMCORP RES. But when comparing it to its historical volatility, FARO Technologies is 7.66 times less risky than VANADIUMCORP RES. It trades about 0.18 of its potential returns per unit of risk. VANADIUMCORP RES is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  13.00  in VANADIUMCORP RES on September 20, 2024 and sell it today you would lose (2.00) from holding VANADIUMCORP RES or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

FARO Technologies  vs.  VANADIUMCORP RES

FARO Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FARO Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, FARO Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

VANADIUMCORP RES

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VANADIUMCORP RES are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VANADIUMCORP RES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FARO Technologies and VANADIUMCORP RES

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

The idea behind FARO Technologies and VANADIUMCORP RES 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .