Correlation Between ESCO Technologies and Coherent

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

By analyzing existing cross correlation between ESCO Technologies and Coherent, you can compare the effects of market volatilities on ESCO Technologies and Coherent 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 Coherent. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESCO Technologies and Coherent.

Diversification Opportunities for ESCO Technologies and Coherent

0.75

Correlation Coefficient

ESCO Technologies  Coherent

Poor diversification

The 3 months correlation between ESCO and Coherent is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Coherent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coherent 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 Coherent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coherent has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Coherent go up and down completely randomly.

Pair Corralation between ESCO Technologies and Coherent

Considering the 90-day investment horizon ESCO Technologies is expected to generate 0.59 times more return on investment than Coherent. However, ESCO Technologies is 1.69 times less risky than Coherent. It trades about 0.28 of its potential returns per unit of risk. Coherent is currently generating about 0.01 per unit of risk. If you would invest  12,888  in ESCO Technologies on August 30, 2024 and sell it today you would earn a total of  2,001  from holding ESCO Technologies or generate 15.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

ESCO Technologies  vs.  Coherent

ESCO Technologies

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ESCO Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coherent

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coherent are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Coherent reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESCO Technologies and Coherent

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

The idea behind ESCO Technologies and Coherent 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.