Correlation Between Track and ESCO Technologies
Can any of the company-specific risk be diversified away by investing in both Track 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 Track and ESCO Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Track Group and ESCO Technologies, you can compare the effects of market volatilities on Track 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 Track with a short position of ESCO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Track and ESCO Technologies.
Diversification Opportunities for Track and ESCO Technologies
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Track and ESCO is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Track Group and ESCO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESCO Technologies and Track 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 Track Group 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 Track i.e., Track and ESCO Technologies go up and down completely randomly.
Pair Corralation between Track and ESCO Technologies
Given the investment horizon of 90 days Track Group is expected to generate 5.47 times more return on investment than ESCO Technologies. However, Track is 5.47 times more volatile than ESCO Technologies. It trades about 0.02 of its potential returns per unit of risk. ESCO Technologies is currently generating about 0.06 per unit of risk. If you would invest 40.00 in Track Group on August 24, 2024 and sell it today you would lose (24.00) from holding Track Group or give up 60.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Track Group vs. ESCO Technologies
Performance |
| Timeline |
| Track Group |
| ESCO Technologies |
Track and ESCO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Track and ESCO Technologies
The main advantage of trading using opposite Track and ESCO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Track 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.| Track vs. Spectris plc | Track vs. Sono Tek Corp | Track vs. Genasys | Track vs. Sensata Technologies Holding |
| 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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