Correlation Between ESCO Technologies and Cognex

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

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

Diversification Opportunities for ESCO Technologies and Cognex

-0.73

Correlation Coefficient

ESCO Technologies  Cognex

Pay attention - limited upside

The 3 months correlation between ESCO and Cognex is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Cognex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognex 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 Cognex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognex has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Cognex go up and down completely randomly.

Pair Corralation between ESCO Technologies and Cognex

Considering the 90-day investment horizon ESCO Technologies is expected to generate 1.18 times more return on investment than Cognex. However, ESCO Technologies is 1.18 times more volatile than Cognex. It trades about 0.11 of its potential returns per unit of risk. Cognex is currently generating about -0.08 per unit of risk. If you would invest  13,321  in ESCO Technologies on December 28, 2024 and sell it today you would earn a total of  2,637  from holding ESCO Technologies or generate 19.8% 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.  Cognex

ESCO Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 8 (%) 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.

Cognex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognex 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 fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ESCO Technologies and Cognex

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

The idea behind ESCO Technologies and Cognex 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.