Correlation Between ESAB Corp and IBC Advanced
Can any of the company-specific risk be diversified away by investing in both ESAB Corp and IBC Advanced 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 IBC Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESAB Corp and IBC Advanced Alloys, you can compare the effects of market volatilities on ESAB Corp and IBC Advanced 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 IBC Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESAB Corp and IBC Advanced.
Diversification Opportunities for ESAB Corp and IBC Advanced
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ESAB and IBC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ESAB Corp and IBC Advanced Alloys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBC Advanced Alloys 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 IBC Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBC Advanced Alloys has no effect on the direction of ESAB Corp i.e., ESAB Corp and IBC Advanced go up and down completely randomly.
Pair Corralation between ESAB Corp and IBC Advanced
Given the investment horizon of 90 days ESAB Corp is expected to generate 1.53 times less return on investment than IBC Advanced. But when comparing it to its historical volatility, ESAB Corp is 5.45 times less risky than IBC Advanced. It trades about 0.21 of its potential returns per unit of risk. IBC Advanced Alloys is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6.00 in IBC Advanced Alloys on September 11, 2024 and sell it today you would earn a total of 0.00 from holding IBC Advanced Alloys or generate 0.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
ESAB Corp vs. IBC Advanced Alloys
Performance |
Timeline |
ESAB Corp |
IBC Advanced Alloys |
ESAB Corp and IBC Advanced Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ESAB Corp and IBC Advanced
The main advantage of trading using opposite ESAB Corp and IBC Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESAB Corp position performs unexpectedly, IBC Advanced 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 IBC Advanced will offset losses from the drop in IBC Advanced's long position.ESAB Corp vs. Northwest Pipe | ESAB Corp vs. Mayville Engineering Co | ESAB Corp vs. Ryerson Holding Corp | ESAB Corp vs. Allegheny Technologies Incorporated |
IBC Advanced vs. Northwest Pipe | IBC Advanced vs. ESAB Corp | IBC Advanced vs. Mayville Engineering Co | IBC Advanced vs. Ryerson Holding Corp |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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