Correlation Between ESAB Corp and Ampco Pittsburgh

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

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

Diversification Opportunities for ESAB Corp and Ampco Pittsburgh

0.14

Correlation Coefficient

ESAB Corp  Ampco Pittsburgh

Average diversification

The 3 months correlation between ESAB and Ampco is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding ESAB Corp and Ampco Pittsburgh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampco Pittsburgh and ESAB Corp 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 ESAB Corp are associated (or correlated) with Ampco Pittsburgh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampco Pittsburgh has no effect on the direction of ESAB Corp i.e., ESAB Corp and Ampco Pittsburgh go up and down completely randomly.

Pair Corralation between ESAB Corp and Ampco Pittsburgh

Given the investment horizon of 90 days ESAB Corp is expected to generate 14.02 times less return on investment than Ampco Pittsburgh. But when comparing it to its historical volatility, ESAB Corp is 2.35 times less risky than Ampco Pittsburgh. It trades about 0.0 of its potential returns per unit of risk. Ampco Pittsburgh is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  206.00  in Ampco Pittsburgh on December 27, 2024 and sell it today you would earn a total of  2.00  from holding Ampco Pittsburgh or generate 0.97% return on investment over 90 days.

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

ESAB Corp  vs.  Ampco Pittsburgh

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 current stock price disturbance, may contribute to short-term losses for the investors.

Ampco Pittsburgh

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ampco Pittsburgh are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ampco Pittsburgh may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ESAB Corp and Ampco Pittsburgh

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

The idea behind ESAB Corp and Ampco Pittsburgh 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 Transaction History module to view history of all your transactions and understand their impact on performance.