Correlation Between FARO Technologies and Focus Universal

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

By analyzing existing cross correlation between FARO Technologies and Focus Universal, you can compare the effects of market volatilities on FARO Technologies and Focus Universal 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 Focus Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and Focus Universal.

Diversification Opportunities for FARO Technologies and Focus Universal

0.55

Correlation Coefficient

FARO Technologies  Focus Universal

Very weak diversification

The 3 months correlation between FARO and Focus is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Focus Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Universal 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 Focus Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Universal has no effect on the direction of FARO Technologies i.e., FARO Technologies and Focus Universal go up and down completely randomly.

Pair Corralation between FARO Technologies and Focus Universal

Given the investment horizon of 90 days FARO Technologies is expected to generate 0.65 times more return on investment than Focus Universal. However, FARO Technologies is 1.55 times less risky than Focus Universal. It trades about -0.01 of its potential returns per unit of risk. Focus Universal is currently generating about -0.09 per unit of risk. If you would invest  3,523  in FARO Technologies on January 26, 2024 and sell it today you would lose (1,661) from holding FARO Technologies or give up 47.15% of portfolio value over 90 days.

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

FARO Technologies  vs.  Focus Universal

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.

Focus Universal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Universal 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 fairly stable which may send shares a bit higher in May 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with FARO Technologies and Focus Universal

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

The idea behind FARO Technologies and Focus Universal 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.