Correlation Between Evolv Technologies and ESAB Corp

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

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

Diversification Opportunities for Evolv Technologies and ESAB Corp

-0.67

Correlation Coefficient

Evolv Technologies  ESAB Corp

Excellent diversification

The 3 months correlation between Evolv and ESAB is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Evolv Technologies Holdings and ESAB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAB Corp and Evolv 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 Evolv Technologies Holdings 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 Evolv Technologies i.e., Evolv Technologies and ESAB Corp go up and down completely randomly.

Pair Corralation between Evolv Technologies and ESAB Corp

Assuming the 90 days horizon Evolv Technologies Holdings is expected to under-perform the ESAB Corp. In addition to that, Evolv Technologies is 5.65 times more volatile than ESAB Corp. It trades about -0.03 of its total potential returns per unit of risk. ESAB Corp is currently generating about 0.16 per unit of volatility. If you would invest  10,552  in ESAB Corp on September 20, 2024 and sell it today you would earn a total of  2,399  from holding ESAB Corp or generate 22.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Evolv Technologies Holdings  vs.  ESAB Corp

Evolv Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolv Technologies Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 Evolv Technologies and ESAB Corp

The main advantage of trading using opposite Evolv Technologies and ESAB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolv Technologies 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 Evolv Technologies Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.