Correlation Between FARO Technologies and Danske Invest

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

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

Diversification Opportunities for FARO Technologies and Danske Invest

-0.4

Correlation Coefficient

FARO Technologies  Danske Invest

Very good diversification

The 3 months correlation between FARO and Danske is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Danske Invest Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danske Invest Global and FARO Technologies 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 FARO Technologies are associated (or correlated) with Danske Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danske Invest Global has no effect on the direction of FARO Technologies i.e., FARO Technologies and Danske Invest go up and down completely randomly.

Pair Corralation between FARO Technologies and Danske Invest

Given the investment horizon of 90 days FARO Technologies is expected to under-perform the Danske Invest. In addition to that, FARO Technologies is 2.58 times more volatile than Danske Invest Global. It trades about -0.44 of its total potential returns per unit of risk. Danske Invest Global is currently generating about -0.07 per unit of volatility. If you would invest  14,055  in Danske Invest Global on January 20, 2024 and sell it today you would lose (115.00) from holding Danske Invest Global or give up 0.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

FARO Technologies  vs.  Danske Invest Global

FARO Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FARO Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Danske Invest Global

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Danske Invest Global are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Danske Invest is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FARO Technologies and Danske Invest

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

The idea behind FARO Technologies and Danske Invest Global 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.