Correlation Between FARO Technologies and DOCDATA

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

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

Diversification Opportunities for FARO Technologies and DOCDATA

-0.19

Correlation Coefficient

FARO Technologies  DOCDATA

Good diversification

The 3 months correlation between FARO and DOCDATA is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies and DOCDATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOCDATA 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 DOCDATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOCDATA has no effect on the direction of FARO Technologies i.e., FARO Technologies and DOCDATA go up and down completely randomly.

Pair Corralation between FARO Technologies and DOCDATA

Assuming the 90 days horizon FARO Technologies is expected to generate 1.44 times more return on investment than DOCDATA. However, FARO Technologies is 1.44 times more volatile than DOCDATA. It trades about 0.16 of its potential returns per unit of risk. DOCDATA is currently generating about -0.02 per unit of risk. If you would invest  2,560  in FARO Technologies on May 1, 2025 and sell it today you would earn a total of  1,180  from holding FARO Technologies or generate 46.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

FARO Technologies  vs.  DOCDATA

FARO Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FARO Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FARO Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

DOCDATA

Risk-Adjusted Performance

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, DOCDATA is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FARO Technologies and DOCDATA

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

The idea behind FARO Technologies and DOCDATA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .