Correlation Between FARO Technologies and Flexpoint Sensor

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

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

Diversification Opportunities for FARO Technologies and Flexpoint Sensor

-0.34

Correlation Coefficient

FARO Technologies  Flexpoint Sensor

Very good diversification

The 3 months correlation between FARO and Flexpoint is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and Flexpoint Sensor Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexpoint Sensor Systems 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 Flexpoint Sensor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexpoint Sensor Systems has no effect on the direction of FARO Technologies i.e., FARO Technologies and Flexpoint Sensor go up and down completely randomly.

Pair Corralation between FARO Technologies and Flexpoint Sensor

Given the investment horizon of 90 days FARO Technologies is expected to under-perform the Flexpoint Sensor. But the stock apears to be less risky and, when comparing its historical volatility, FARO Technologies is 6.2 times less risky than Flexpoint Sensor. The stock trades about -0.02 of its potential returns per unit of risk. The Flexpoint Sensor Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Flexpoint Sensor Systems on January 24, 2024 and sell it today you would lose (2.55) from holding Flexpoint Sensor Systems or give up 85.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

FARO Technologies  vs.  Flexpoint Sensor Systems

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.

Flexpoint Sensor Systems

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Flexpoint Sensor Systems are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Flexpoint Sensor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FARO Technologies and Flexpoint Sensor

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

The idea behind FARO Technologies and Flexpoint Sensor Systems 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.