Correlation Between ESCO Technologies and Sono Tek
Can any of the company-specific risk be diversified away by investing in both ESCO Technologies and Sono Tek 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 Sono Tek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESCO Technologies and Sono Tek Corp, you can compare the effects of market volatilities on ESCO Technologies and Sono Tek 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 Sono Tek. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESCO Technologies and Sono Tek.
Diversification Opportunities for ESCO Technologies and Sono Tek
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESCO and Sono is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Sono Tek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sono Tek Corp 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 Sono Tek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sono Tek Corp has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Sono Tek go up and down completely randomly.
Pair Corralation between ESCO Technologies and Sono Tek
Considering the 90-day investment horizon ESCO Technologies is expected to generate 0.46 times more return on investment than Sono Tek. However, ESCO Technologies is 2.17 times less risky than Sono Tek. It trades about 0.05 of its potential returns per unit of risk. Sono Tek Corp is currently generating about -0.19 per unit of risk. If you would invest 13,153 in ESCO Technologies on November 3, 2024 and sell it today you would earn a total of 121.00 from holding ESCO Technologies or generate 0.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ESCO Technologies vs. Sono Tek Corp
Performance |
| Timeline |
| ESCO Technologies |
| Sono Tek Corp |
ESCO Technologies and Sono Tek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ESCO Technologies and Sono Tek
The main advantage of trading using opposite ESCO Technologies and Sono Tek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESCO Technologies position performs unexpectedly, Sono Tek 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 Sono Tek will offset losses from the drop in Sono Tek's long position.| ESCO Technologies vs. Novanta | ESCO Technologies vs. Sono Tek Corp | ESCO Technologies vs. Itron Inc | ESCO Technologies vs. Badger Meter |
| Sono Tek vs. Novanta | Sono Tek vs. ESCO Technologies | Sono Tek vs. Vontier Corp | Sono Tek vs. Sensata Technologies Holding |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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