Correlation Between Cepton and Sono Tek

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

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

Diversification Opportunities for Cepton and Sono Tek

0.48

Correlation Coefficient

Cepton  Sono Tek

Very weak diversification

The 3 months correlation between Cepton and Sono is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Cepton Inc and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp and Cepton 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 Cepton Inc are associated (or correlated) with Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of Cepton i.e., Cepton and Sono Tek go up and down completely randomly.

Pair Corralation between Cepton and Sono Tek

Given the investment horizon of 90 days Cepton Inc is expected to under-perform the Sono Tek. But the stock apears to be less risky and, when comparing its historical volatility, Cepton Inc is 4.73 times less risky than Sono Tek. The stock trades about -0.07 of its potential returns per unit of risk. The Sono Tek Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  438.00  in Sono Tek Corp on August 30, 2024 and sell it today you would earn a total of  28.00  from holding Sono Tek Corp or generate 6.39% return on investment over 90 days.

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

Cepton Inc  vs.  Sono Tek Corp

Cepton Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cepton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Sono Tek Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sono Tek Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, Sono Tek disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cepton and Sono Tek

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

The idea behind Cepton Inc and Sono Tek Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.