Correlation Between ESCO Technologies and Cepton
Can any of the company-specific risk be diversified away by investing in both ESCO Technologies and Cepton 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 Cepton into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESCO Technologies and Cepton Inc, you can compare the effects of market volatilities on ESCO Technologies and Cepton 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 Cepton. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESCO Technologies and Cepton.
Diversification Opportunities for ESCO Technologies and Cepton
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ESCO and Cepton is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Cepton Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cepton Inc 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 Cepton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cepton Inc has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Cepton go up and down completely randomly.
Pair Corralation between ESCO Technologies and Cepton
Considering the 90-day investment horizon ESCO Technologies is expected to generate 138.83 times less return on investment than Cepton. But when comparing it to its historical volatility, ESCO Technologies is 13.52 times less risky than Cepton. It trades about 0.02 of its potential returns per unit of risk. Cepton Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 0.69 in Cepton Inc on October 22, 2024 and sell it today you would earn a total of 0.14 from holding Cepton Inc or generate 20.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 52.63% |
| Values | Daily Returns |
ESCO Technologies vs. Cepton Inc
Performance |
| Timeline |
| ESCO Technologies |
| Cepton Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
ESCO Technologies and Cepton Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESCO Technologies and Cepton
The main advantage of trading using opposite ESCO Technologies and Cepton positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESCO Technologies position performs unexpectedly, Cepton 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 Cepton will offset losses from the drop in Cepton's long position.| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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