Correlation Between Dave Warrants and ESAB Corp

Can any of the company-specific risk be diversified away by investing in both Dave Warrants and ESAB Corp 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 Dave Warrants and ESAB Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dave Warrants and ESAB Corp, you can compare the effects of market volatilities on Dave Warrants and ESAB Corp 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 Dave Warrants with a short position of ESAB Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dave Warrants and ESAB Corp.

Diversification Opportunities for Dave Warrants and ESAB Corp

0.59

Correlation Coefficient

Dave Warrants  ESAB Corp

Very weak diversification

The 3 months correlation between Dave and ESAB is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dave Warrants and ESAB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAB Corp and Dave Warrants 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 Dave Warrants are associated (or correlated) with ESAB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESAB Corp has no effect on the direction of Dave Warrants i.e., Dave Warrants and ESAB Corp go up and down completely randomly.

Pair Corralation between Dave Warrants and ESAB Corp

Assuming the 90 days horizon Dave Warrants is expected to generate 12.52 times more return on investment than ESAB Corp. However, Dave Warrants is 12.52 times more volatile than ESAB Corp. It trades about 0.17 of its potential returns per unit of risk. ESAB Corp is currently generating about 0.16 per unit of risk. If you would invest  4.37  in Dave Warrants on September 19, 2024 and sell it today you would earn a total of  15.63  from holding Dave Warrants or generate 357.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Dave Warrants  vs.  ESAB Corp

Dave Warrants

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Warrants are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Dave Warrants showed solid returns over the last few months and may actually be approaching a breakup point.

ESAB Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESAB Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, ESAB Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dave Warrants and ESAB Corp

The main advantage of trading using opposite Dave Warrants and ESAB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dave Warrants position performs unexpectedly, ESAB Corp 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 ESAB Corp will offset losses from the drop in ESAB Corp's long position.

The idea behind Dave Warrants and ESAB Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.