Correlation Between Saddle Ranch and Sono Tek

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

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

Diversification Opportunities for Saddle Ranch and Sono Tek

0.09

Correlation Coefficient

Saddle Ranch  Sono Tek

Significant diversification

The 3 months correlation between Saddle and Sono is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Saddle Ranch Media 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 Saddle Ranch 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 Saddle Ranch Media 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 Saddle Ranch i.e., Saddle Ranch and Sono Tek go up and down completely randomly.

Pair Corralation between Saddle Ranch and Sono Tek

Given the investment horizon of 90 days Saddle Ranch Media is expected to generate 16.94 times more return on investment than Sono Tek. However, Saddle Ranch is 16.94 times more volatile than Sono Tek Corp. It trades about 0.16 of its potential returns per unit of risk. Sono Tek Corp is currently generating about 0.16 per unit of risk. If you would invest  0.02  in Saddle Ranch Media on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Saddle Ranch Media or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Saddle Ranch Media  vs.  Sono Tek Corp

Saddle Ranch Media

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saddle Ranch Media are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Saddle Ranch showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Saddle Ranch and Sono Tek

The main advantage of trading using opposite Saddle Ranch and Sono Tek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saddle Ranch 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 Saddle Ranch Media 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.