Correlation Between Schmitt Industries and Sono Tek

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

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

Diversification Opportunities for Schmitt Industries and Sono Tek

-0.29

Correlation Coefficient

Schmitt Industries  Sono Tek

Very good diversification

The 3 months correlation between Schmitt and Sono is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Schmitt Industries and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp and Schmitt Industries 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 Schmitt Industries are associated (or correlated) with Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of Schmitt Industries i.e., Schmitt Industries and Sono Tek go up and down completely randomly.

Pair Corralation between Schmitt Industries and Sono Tek

If you would invest  434.00  in Sono Tek Corp on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Sono Tek Corp or generate 3.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Schmitt Industries  vs.  Sono Tek Corp

Schmitt Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Schmitt Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Schmitt Industries is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Sono Tek Corp

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sono Tek Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Sono Tek is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Schmitt Industries and Sono Tek

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

The idea behind Schmitt Industries and Sono Tek 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.