Correlation Between Sono Tek and Novanta

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

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

Diversification Opportunities for Sono Tek and Novanta

-0.18

Correlation Coefficient

Sono Tek  Novanta

Good diversification

The 3 months correlation between Sono and Novanta is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sono Tek Corp and Novanta in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novanta and Sono Tek 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 Sono Tek Corp are associated (or correlated) with Novanta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novanta has no effect on the direction of Sono Tek i.e., Sono Tek and Novanta go up and down completely randomly.

Pair Corralation between Sono Tek and Novanta

Given the investment horizon of 90 days Sono Tek Corp is expected to under-perform the Novanta. In addition to that, Sono Tek is 2.21 times more volatile than Novanta. It trades about -0.1 of its total potential returns per unit of risk. Novanta is currently generating about -0.19 per unit of volatility. If you would invest  16,698  in Novanta on September 30, 2024 and sell it today you would lose (1,224) from holding Novanta or give up 7.33% of portfolio value over 90 days.

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

Sono Tek Corp  vs.  Novanta

Sono Tek Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sono Tek Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Sono Tek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Novanta

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novanta has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sono Tek and Novanta

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

The idea behind Sono Tek Corp and Novanta 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.