Correlation Between ESCO Technologies and Itron
Can any of the company-specific risk be diversified away by investing in both ESCO Technologies and Itron 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 Itron into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESCO Technologies and Itron Inc, you can compare the effects of market volatilities on ESCO Technologies and Itron 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 Itron. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESCO Technologies and Itron.
Diversification Opportunities for ESCO Technologies and Itron
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ESCO and Itron is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Itron Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itron 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 Itron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itron Inc has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Itron go up and down completely randomly.
Pair Corralation between ESCO Technologies and Itron
Considering the 90-day investment horizon ESCO Technologies is expected to generate 1.7 times less return on investment than Itron. But when comparing it to its historical volatility, ESCO Technologies is 1.47 times less risky than Itron. It trades about 0.06 of its potential returns per unit of risk. Itron Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5,387 in Itron Inc on August 24, 2024 and sell it today you would earn a total of 6,250 from holding Itron Inc or generate 116.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
ESCO Technologies vs. Itron Inc
Performance |
| Timeline |
| ESCO Technologies |
| Itron Inc |
ESCO Technologies and Itron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESCO Technologies and Itron
The main advantage of trading using opposite ESCO Technologies and Itron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESCO Technologies position performs unexpectedly, Itron 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 Itron will offset losses from the drop in Itron'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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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