Correlation Between ESAB Corp and ADF
Can any of the company-specific risk be diversified away by investing in both ESAB Corp and ADF 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 ESAB Corp and ADF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESAB Corp and ADF Group, you can compare the effects of market volatilities on ESAB Corp and ADF 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 ESAB Corp with a short position of ADF. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESAB Corp and ADF.
Diversification Opportunities for ESAB Corp and ADF
Pay attention - limited upside
The 3 months correlation between ESAB and ADF is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding ESAB Corp and ADF Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Group and ESAB Corp 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 ESAB Corp are associated (or correlated) with ADF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Group has no effect on the direction of ESAB Corp i.e., ESAB Corp and ADF go up and down completely randomly.
Pair Corralation between ESAB Corp and ADF
Given the investment horizon of 90 days ESAB Corp is expected to generate 1.05 times less return on investment than ADF. But when comparing it to its historical volatility, ESAB Corp is 2.34 times less risky than ADF. It trades about 0.11 of its potential returns per unit of risk. ADF Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 499.00 in ADF Group on September 4, 2024 and sell it today you would earn a total of 167.00 from holding ADF Group or generate 33.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 97.98% |
| Values | Daily Returns |
ESAB Corp vs. ADF Group
Performance |
| Timeline |
| ESAB Corp |
| ADF Group |
ESAB Corp and ADF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESAB Corp and ADF
The main advantage of trading using opposite ESAB Corp and ADF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESAB Corp position performs unexpectedly, ADF 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 ADF will offset losses from the drop in ADF's long position.| ESAB Corp vs. Northwest Pipe | ESAB Corp vs. Mayville Engineering Co | ESAB Corp vs. Ryerson Holding Corp | ESAB Corp vs. Allegheny Technologies Incorporated |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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