Correlation Between Sono Tek and Cepton

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

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

Diversification Opportunities for Sono Tek and Cepton

0.47

Correlation Coefficient

Sono Tek  Cepton

Very weak diversification

The 3 months correlation between Sono and Cepton is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Cepton Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cepton Inc and Sono Tek 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 Sono Tek Corp are associated (or correlated) with Cepton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cepton Inc has no effect on the direction of Sono Tek i.e., Sono Tek and Cepton go up and down completely randomly.

Pair Corralation between Sono Tek and Cepton

Given the investment horizon of 90 days Sono Tek Corp is expected to generate 3.87 times more return on investment than Cepton. However, Sono Tek is 3.87 times more volatile than Cepton Inc. It trades about 0.3 of its potential returns per unit of risk. Cepton Inc is currently generating about 0.04 per unit of risk. If you would invest  427.00  in Sono Tek Corp on September 2, 2024 and sell it today you would earn a total of  47.00  from holding Sono Tek Corp or generate 11.01% return on investment over 90 days.

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

Sono Tek Corp  vs.  Cepton Inc

Sono Tek Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sono Tek Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Sono Tek disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cepton Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 10 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sono Tek and Cepton

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

The idea behind Sono Tek Corp and Cepton Inc 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 Commodity Directory module to find actively traded commodities issued by global exchanges.