Correlation Between ESCO Technologies and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both ESCO Technologies and FARO Technologies 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 FARO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESCO Technologies and FARO Technologies, you can compare the effects of market volatilities on ESCO Technologies and FARO Technologies 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 FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESCO Technologies and FARO Technologies.
Diversification Opportunities for ESCO Technologies and FARO Technologies
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESCO and FARO is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies 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 FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and FARO Technologies go up and down completely randomly.
Pair Corralation between ESCO Technologies and FARO Technologies
Considering the 90-day investment horizon ESCO Technologies is expected to generate 0.42 times more return on investment than FARO Technologies. However, ESCO Technologies is 2.35 times less risky than FARO Technologies. It trades about 0.06 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.01 per unit of risk. If you would invest 9,307 in ESCO Technologies on August 24, 2024 and sell it today you would earn a total of 5,545 from holding ESCO Technologies or generate 59.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESCO Technologies vs. FARO Technologies
Performance |
| Timeline |
| ESCO Technologies |
| FARO Technologies |
ESCO Technologies and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESCO Technologies and FARO Technologies
The main advantage of trading using opposite ESCO Technologies and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESCO Technologies position performs unexpectedly, FARO Technologies 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 FARO Technologies will offset losses from the drop in FARO Technologies' long position.| ESCO Technologies vs. Novanta | ESCO Technologies vs. Sono Tek Corp | ESCO Technologies vs. Itron Inc | ESCO Technologies vs. Badger Meter |
| FARO Technologies vs. Coherent | FARO Technologies vs. ESCO Technologies | FARO Technologies vs. Mesa Laboratories | FARO Technologies vs. Vishay Precision Group |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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