Correlation Between Sensata Technologies and ESCO Technologies
Can any of the company-specific risk be diversified away by investing in both Sensata Technologies 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 Sensata Technologies and ESCO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sensata Technologies Holding and ESCO Technologies, you can compare the effects of market volatilities on Sensata Technologies 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 Sensata Technologies with a short position of ESCO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensata Technologies and ESCO Technologies.
Diversification Opportunities for Sensata Technologies and ESCO Technologies
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sensata and ESCO is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sensata Technologies Holding and ESCO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESCO Technologies and Sensata 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 Sensata Technologies Holding 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 Sensata Technologies i.e., Sensata Technologies and ESCO Technologies go up and down completely randomly.
Pair Corralation between Sensata Technologies and ESCO Technologies
Allowing for the 90-day total investment horizon Sensata Technologies Holding is expected to under-perform the ESCO Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Sensata Technologies Holding is 1.06 times less risky than ESCO Technologies. The stock trades about -0.21 of its potential returns per unit of risk. The ESCO Technologies is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 13,007 in ESCO Technologies on August 27, 2024 and sell it today you would earn a total of 1,887 from holding ESCO Technologies or generate 14.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sensata Technologies Holding vs. ESCO Technologies
Performance |
| Timeline |
| Sensata Technologies |
| ESCO Technologies |
Sensata Technologies and ESCO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sensata Technologies and ESCO Technologies
The main advantage of trading using opposite Sensata Technologies and ESCO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sensata Technologies 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.| Sensata Technologies vs. Cepton Inc | Sensata Technologies vs. SaverOne 2014 Ltd | Sensata Technologies vs. Kraken Robotics | Sensata Technologies vs. Focus Universal |
| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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