Correlation Between Sono Tek and Schmitt Industries

Can any of the company-specific risk be diversified away by investing in both Sono Tek and Schmitt Industries 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 Schmitt Industries 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 Schmitt Industries, you can compare the effects of market volatilities on Sono Tek and Schmitt Industries 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 Schmitt Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sono Tek and Schmitt Industries.

Diversification Opportunities for Sono Tek and Schmitt Industries

-0.29

Correlation Coefficient

Sono Tek  Schmitt Industries

Very good diversification

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

Pair Corralation between Sono Tek and Schmitt Industries

If you would invest  410.00  in Sono Tek Corp on September 13, 2024 and sell it today you would earn a total of  73.00  from holding Sono Tek Corp or generate 17.8% return on investment over 90 days.

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

Sono Tek Corp  vs.  Schmitt Industries

Sono Tek Corp

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sono Tek Corp are ranked lower than 9 (%) 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.

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sono Tek and Schmitt Industries

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

The idea behind Sono Tek Corp and Schmitt Industries 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.