Correlation Between ESAB Corp and Mueller Industries
Can any of the company-specific risk be diversified away by investing in both ESAB Corp and Mueller Industries 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 Mueller Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESAB Corp and Mueller Industries, you can compare the effects of market volatilities on ESAB Corp and Mueller Industries 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 Mueller Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESAB Corp and Mueller Industries.
Diversification Opportunities for ESAB Corp and Mueller Industries
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ESAB and Mueller is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ESAB Corp and Mueller Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mueller Industries 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 Mueller Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mueller Industries has no effect on the direction of ESAB Corp i.e., ESAB Corp and Mueller Industries go up and down completely randomly.
Pair Corralation between ESAB Corp and Mueller Industries
Given the investment horizon of 90 days ESAB Corp is expected to generate 1.09 times more return on investment than Mueller Industries. However, ESAB Corp is 1.09 times more volatile than Mueller Industries. It trades about 0.22 of its potential returns per unit of risk. Mueller Industries is currently generating about 0.12 per unit of risk. If you would invest 11,004 in ESAB Corp on August 26, 2024 and sell it today you would earn a total of 1,750 from holding ESAB Corp or generate 15.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESAB Corp vs. Mueller Industries
Performance |
| Timeline |
| ESAB Corp |
| Mueller Industries |
ESAB Corp and Mueller Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESAB Corp and Mueller Industries
The main advantage of trading using opposite ESAB Corp and Mueller Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESAB Corp position performs unexpectedly, Mueller Industries 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 Mueller Industries will offset losses from the drop in Mueller Industries' long position.| ESAB Corp vs. Dave Warrants | ESAB Corp vs. Evolv Technologies Holdings | ESAB Corp vs. Aquagold International | ESAB Corp vs. Morningstar Unconstrained Allocation |
| Mueller Industries vs. Insteel Industries | Mueller Industries vs. Carpenter Technology | Mueller Industries vs. Haynes International | Mueller Industries vs. Northwest Pipe |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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