Correlation Between CompoSecure and ESAB Corp

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

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

Diversification Opportunities for CompoSecure and ESAB Corp

0.42

Correlation Coefficient

CompoSecure  ESAB Corp

Very weak diversification

The 3 months correlation between CompoSecure and ESAB is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and ESAB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAB Corp and CompoSecure 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 CompoSecure 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 CompoSecure i.e., CompoSecure and ESAB Corp go up and down completely randomly.

Pair Corralation between CompoSecure and ESAB Corp

Given the investment horizon of 90 days CompoSecure is expected to under-perform the ESAB Corp. In addition to that, CompoSecure is 1.56 times more volatile than ESAB Corp. It trades about -0.07 of its total potential returns per unit of risk. ESAB Corp is currently generating about -0.02 per unit of volatility. If you would invest  12,011  in ESAB Corp on December 30, 2024 and sell it today you would lose (427.00) from holding ESAB Corp or give up 3.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CompoSecure  vs.  ESAB Corp

CompoSecure

Risk-Adjusted Performance

Very Weak

Over the last 90 days CompoSecure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ESAB Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESAB Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ESAB Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CompoSecure and ESAB Corp

The main advantage of trading using opposite CompoSecure and ESAB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompoSecure 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 CompoSecure 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.