Correlation Between Cepton and ESCO Technologies
Can any of the company-specific risk be diversified away by investing in both Cepton 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 Cepton and ESCO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cepton Inc and ESCO Technologies, you can compare the effects of market volatilities on Cepton 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 Cepton with a short position of ESCO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cepton and ESCO Technologies.
Diversification Opportunities for Cepton and ESCO Technologies
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cepton and ESCO is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cepton Inc and ESCO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESCO Technologies 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 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 Cepton i.e., Cepton and ESCO Technologies go up and down completely randomly.
Pair Corralation between Cepton and ESCO Technologies
Given the investment horizon of 90 days Cepton Inc is expected to under-perform the ESCO Technologies. In addition to that, Cepton is 3.12 times more volatile than ESCO Technologies. It trades about -0.01 of its total potential returns per unit of risk. ESCO Technologies is currently generating about 0.08 per unit of volatility. If you would invest 10,034 in ESCO Technologies on August 28, 2024 and sell it today you would earn a total of 5,104 from holding ESCO Technologies or generate 50.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Cepton Inc vs. ESCO Technologies
Performance |
| Timeline |
| Cepton Inc |
| ESCO Technologies |
Cepton and ESCO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cepton and ESCO Technologies
The main advantage of trading using opposite Cepton and ESCO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cepton 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.The idea behind Cepton Inc and ESCO Technologies 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.| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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