Correlation Between Coherent and ESCO Technologies
Can any of the company-specific risk be diversified away by investing in both Coherent and ESCO Technologies 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 Coherent and ESCO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coherent and ESCO Technologies, you can compare the effects of market volatilities on Coherent and ESCO Technologies 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 Coherent with a short position of ESCO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coherent and ESCO Technologies.
Diversification Opportunities for Coherent and ESCO Technologies
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coherent and ESCO is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Coherent and ESCO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESCO Technologies and Coherent 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 Coherent are associated (or correlated) with ESCO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESCO Technologies has no effect on the direction of Coherent i.e., Coherent and ESCO Technologies go up and down completely randomly.
Pair Corralation between Coherent and ESCO Technologies
Given the investment horizon of 90 days Coherent is expected to generate 1.35 times less return on investment than ESCO Technologies. In addition to that, Coherent is 1.66 times more volatile than ESCO Technologies. It trades about 0.12 of its total potential returns per unit of risk. ESCO Technologies is currently generating about 0.28 per unit of volatility. If you would invest 13,007 in ESCO Technologies on August 27, 2024 and sell it today you would earn a total of 1,887 from holding ESCO Technologies or generate 14.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coherent vs. ESCO Technologies
Performance |
| Timeline |
| Coherent |
| ESCO Technologies |
Coherent and ESCO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coherent and ESCO Technologies
The main advantage of trading using opposite Coherent and ESCO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coherent position performs unexpectedly, ESCO Technologies 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 ESCO Technologies will offset losses from the drop in ESCO Technologies' long position.| Coherent vs. MKS Instruments | Coherent vs. IPG Photonics | Coherent vs. Cognex | Coherent vs. Lumentum Holdings |
| ESCO Technologies vs. Novanta | ESCO Technologies vs. Sono Tek Corp | ESCO Technologies vs. Itron Inc | ESCO Technologies vs. Badger Meter |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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