Correlation Between CompoSecure and ESAB Corp
Can any of the company-specific risk be diversified away by investing in both CompoSecure and ESAB Corp 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 CompoSecure and ESAB Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CompoSecure and ESAB Corp, you can compare the effects of market volatilities on CompoSecure and ESAB Corp 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 CompoSecure with a short position of ESAB Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CompoSecure and ESAB Corp.
Diversification Opportunities for CompoSecure and ESAB Corp
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CompoSecure and ESAB is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and ESAB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAB Corp and CompoSecure 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 CompoSecure are associated (or correlated) with ESAB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESAB Corp has no effect on the direction of CompoSecure i.e., CompoSecure and ESAB Corp go up and down completely randomly.
Pair Corralation between CompoSecure and ESAB Corp
Given the investment horizon of 90 days CompoSecure is expected to generate 5.0 times less return on investment than ESAB Corp. But when comparing it to its historical volatility, CompoSecure is 1.09 times less risky than ESAB Corp. It trades about 0.04 of its potential returns per unit of risk. ESAB Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 11,149 in ESAB Corp on August 24, 2024 and sell it today you would earn a total of 1,397 from holding ESAB Corp or generate 12.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
CompoSecure vs. ESAB Corp
Performance |
| Timeline |
| CompoSecure |
| ESAB Corp |
CompoSecure and ESAB Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CompoSecure and ESAB Corp
The main advantage of trading using opposite CompoSecure and ESAB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompoSecure position performs unexpectedly, ESAB Corp 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 ESAB Corp will offset losses from the drop in ESAB Corp's long position.| CompoSecure vs. Northwest Pipe | CompoSecure vs. Insteel Industries | CompoSecure vs. Carpenter Technology | CompoSecure vs. ESAB Corp |
| ESAB Corp vs. Northwest Pipe | ESAB Corp vs. Haynes International | ESAB Corp vs. Mayville Engineering Co | ESAB Corp vs. Ryerson Holding Corp |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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