Correlation Between ESCO Technologies and Astrotech Corp

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

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

Diversification Opportunities for ESCO Technologies and Astrotech Corp

-0.64

Correlation Coefficient

ESCO Technologies  Astrotech Corp

Excellent diversification

The 3 months correlation between ESCO and Astrotech is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Astrotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astrotech Corp 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 Astrotech Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astrotech Corp has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Astrotech Corp go up and down completely randomly.

Pair Corralation between ESCO Technologies and Astrotech Corp

Considering the 90-day investment horizon ESCO Technologies is expected to generate 0.46 times more return on investment than Astrotech Corp. However, ESCO Technologies is 2.2 times less risky than Astrotech Corp. It trades about 0.25 of its potential returns per unit of risk. Astrotech Corp is currently generating about -0.15 per unit of risk. If you would invest  11,455  in ESCO Technologies on September 2, 2024 and sell it today you would earn a total of  3,386  from holding ESCO Technologies or generate 29.56% return on investment over 90 days.

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

ESCO Technologies  vs.  Astrotech Corp

ESCO Technologies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 19 (%) 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.

Astrotech Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astrotech Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ESCO Technologies and Astrotech Corp

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

The idea behind ESCO Technologies and Astrotech 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.