Correlation Between ESAB Corp and CompoSecure
Can any of the company-specific risk be diversified away by investing in both ESAB Corp and CompoSecure 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 CompoSecure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESAB Corp and CompoSecure, you can compare the effects of market volatilities on ESAB Corp and CompoSecure 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 CompoSecure. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESAB Corp and CompoSecure.
Diversification Opportunities for ESAB Corp and CompoSecure
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESAB and CompoSecure is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ESAB Corp and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of ESAB Corp i.e., ESAB Corp and CompoSecure go up and down completely randomly.
Pair Corralation between ESAB Corp and CompoSecure
Given the investment horizon of 90 days ESAB Corp is expected to generate 1.34 times less return on investment than CompoSecure. But when comparing it to its historical volatility, ESAB Corp is 1.63 times less risky than CompoSecure. It trades about 0.11 of its potential returns per unit of risk. CompoSecure is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 647.00 in CompoSecure on August 27, 2024 and sell it today you would earn a total of 957.00 from holding CompoSecure or generate 147.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESAB Corp vs. CompoSecure
Performance |
| Timeline |
| ESAB Corp |
| CompoSecure |
ESAB Corp and CompoSecure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESAB Corp and CompoSecure
The main advantage of trading using opposite ESAB Corp and CompoSecure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESAB Corp position performs unexpectedly, CompoSecure 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 CompoSecure will offset losses from the drop in CompoSecure's long position.| ESAB Corp vs. Dave Warrants | ESAB Corp vs. Evolv Technologies Holdings | ESAB Corp vs. Aquagold International | ESAB Corp vs. Morningstar Unconstrained Allocation |
| CompoSecure vs. Northwest Pipe | CompoSecure vs. Insteel Industries | CompoSecure vs. Carpenter Technology | CompoSecure vs. ESAB 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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