Correlation Between Trimble and Cognex

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

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

Diversification Opportunities for Trimble and Cognex

0.33

Correlation Coefficient

Trimble  Cognex

Weak diversification

The 3 months correlation between Trimble and Cognex is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Trimble and Cognex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognex and Trimble 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 Trimble are associated (or correlated) with Cognex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognex has no effect on the direction of Trimble i.e., Trimble and Cognex go up and down completely randomly.

Pair Corralation between Trimble and Cognex

Assuming the 90 days horizon Trimble is expected to generate 1.37 times more return on investment than Cognex. However, Trimble is 1.37 times more volatile than Cognex. It trades about 0.15 of its potential returns per unit of risk. Cognex is currently generating about -0.03 per unit of risk. If you would invest  5,474  in Trimble on September 27, 2024 and sell it today you would earn a total of  1,348  from holding Trimble or generate 24.63% return on investment over 90 days.

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

Trimble  vs.  Cognex

Trimble

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Trimble reported solid returns over the last few months and may actually be approaching a breakup point.

Cognex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cognex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cognex is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Trimble and Cognex

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

The idea behind Trimble and Cognex 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..