Correlation Between Kaltura and FARO Technologies

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

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

Diversification Opportunities for Kaltura and FARO Technologies

0.98

Correlation Coefficient

Kaltura  FARO Technologies

Almost no diversification

The 3 months correlation between Kaltura and FARO is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Kaltura and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies and Kaltura 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 Kaltura are associated (or correlated) with FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of Kaltura i.e., Kaltura and FARO Technologies go up and down completely randomly.

Pair Corralation between Kaltura and FARO Technologies

Given the investment horizon of 90 days Kaltura is expected to generate 0.83 times more return on investment than FARO Technologies. However, Kaltura is 1.21 times less risky than FARO Technologies. It trades about 0.25 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.17 per unit of risk. If you would invest  128.00  in Kaltura on September 14, 2024 and sell it today you would earn a total of  106.00  from holding Kaltura or generate 82.81% return on investment over 90 days.

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

Kaltura  vs.  FARO Technologies

Kaltura

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kaltura are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Kaltura reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of very weak basic indicators, FARO Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kaltura and FARO Technologies

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

The idea behind Kaltura and FARO 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.

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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.