Correlation Between ESCO Technologies and Badger Meter
Can any of the company-specific risk be diversified away by investing in both ESCO Technologies and Badger Meter 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 ESCO Technologies and Badger Meter into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESCO Technologies and Badger Meter, you can compare the effects of market volatilities on ESCO Technologies and Badger Meter 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 ESCO Technologies with a short position of Badger Meter. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESCO Technologies and Badger Meter.
Diversification Opportunities for ESCO Technologies and Badger Meter
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESCO and Badger is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Badger Meter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Badger Meter and ESCO Technologies 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 ESCO Technologies are associated (or correlated) with Badger Meter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Badger Meter has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Badger Meter go up and down completely randomly.
Pair Corralation between ESCO Technologies and Badger Meter
Considering the 90-day investment horizon ESCO Technologies is expected to generate 1.74 times less return on investment than Badger Meter. But when comparing it to its historical volatility, ESCO Technologies is 1.14 times less risky than Badger Meter. It trades about 0.05 of its potential returns per unit of risk. Badger Meter is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 11,965 in Badger Meter on November 2, 2024 and sell it today you would earn a total of 9,492 from holding Badger Meter or generate 79.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
ESCO Technologies vs. Badger Meter
Performance |
| Timeline |
| ESCO Technologies |
| Badger Meter |
ESCO Technologies and Badger Meter Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESCO Technologies and Badger Meter
The main advantage of trading using opposite ESCO Technologies and Badger Meter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESCO Technologies position performs unexpectedly, Badger Meter 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 Badger Meter will offset losses from the drop in Badger Meter's long position.| ESCO Technologies vs. Novanta | ESCO Technologies vs. Sono Tek Corp | ESCO Technologies vs. Itron Inc | ESCO Technologies vs. Badger Meter |
| Badger Meter vs. ESCO Technologies | Badger Meter vs. Novanta | Badger Meter vs. Sensata Technologies Holding | Badger Meter vs. Fortive 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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