Correlation Between NYSE Composite and ESCO Technologies
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and ESCO 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 NYSE Composite and ESCO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and ESCO Technologies, you can compare the effects of market volatilities on NYSE Composite and ESCO 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 NYSE Composite with a short position of ESCO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and ESCO Technologies.
Diversification Opportunities for NYSE Composite and ESCO Technologies
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and ESCO is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and ESCO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESCO Technologies and NYSE Composite 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 NYSE Composite are associated (or correlated) with ESCO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESCO Technologies has no effect on the direction of NYSE Composite i.e., NYSE Composite and ESCO Technologies go up and down completely randomly.
Pair Corralation between NYSE Composite and ESCO Technologies
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.87 times less return on investment than ESCO Technologies. But when comparing it to its historical volatility, NYSE Composite is 2.41 times less risky than ESCO Technologies. It trades about 0.11 of its potential returns per unit of risk. ESCO Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 9,205 in ESCO Technologies on August 27, 2024 and sell it today you would earn a total of 5,689 from holding ESCO Technologies or generate 61.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. ESCO Technologies
Performance |
| Timeline |
NYSE Composite and ESCO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
ESCO Technologies
Pair trading matchups for ESCO Technologies
Pair Trading with NYSE Composite and ESCO Technologies
The main advantage of trading using opposite NYSE Composite and ESCO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, ESCO 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 ESCO Technologies will offset losses from the drop in ESCO Technologies' long position.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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