Correlation Between Cognex and Keysight Technologies

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

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

Diversification Opportunities for Cognex and Keysight Technologies

-0.14

Correlation Coefficient

Cognex  Keysight Technologies

Good diversification

The 3 months correlation between Cognex and Keysight is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cognex and Keysight Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keysight Technologies and Cognex 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 Cognex are associated (or correlated) with Keysight Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keysight Technologies has no effect on the direction of Cognex i.e., Cognex and Keysight Technologies go up and down completely randomly.

Pair Corralation between Cognex and Keysight Technologies

Given the investment horizon of 90 days Cognex is expected to under-perform the Keysight Technologies. In addition to that, Cognex is 1.14 times more volatile than Keysight Technologies. It trades about -0.18 of its total potential returns per unit of risk. Keysight Technologies is currently generating about -0.17 per unit of volatility. If you would invest  15,258  in Keysight Technologies on January 24, 2024 and sell it today you would lose (784.00) from holding Keysight Technologies or give up 5.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Cognex  vs.  Keysight Technologies

Cognex

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cognex are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Cognex is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Keysight Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keysight Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Keysight Technologies 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 Cognex and Keysight Technologies

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

The idea behind Cognex and Keysight Technologies 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 Stocks Directory module to find actively traded stocks across global markets.