Correlation Between ESCO Technologies and Keysight Technologies

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Can any of the company-specific risk be diversified away by investing in both ESCO Technologies and Keysight Technologies 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 Keysight Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ESCO Technologies and Keysight Technologies, you can compare the effects of market volatilities on ESCO Technologies and Keysight Technologies 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 Keysight Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ESCO Technologies and Keysight Technologies.

Diversification Opportunities for ESCO Technologies and Keysight Technologies

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between ESCO and Keysight is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Keysight Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keysight Technologies 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 Keysight Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keysight Technologies has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Keysight Technologies go up and down completely randomly.

Pair Corralation between ESCO Technologies and Keysight Technologies

Considering the 90-day investment horizon ESCO Technologies is expected to generate 0.92 times more return on investment than Keysight Technologies. However, ESCO Technologies is 1.08 times less risky than Keysight Technologies. It trades about 0.2 of its potential returns per unit of risk. Keysight Technologies is currently generating about 0.14 per unit of risk. If you would invest  11,542  in ESCO Technologies on September 10, 2024 and sell it today you would earn a total of  2,724  from holding ESCO Technologies or generate 23.6% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ESCO Technologies  vs.  Keysight Technologies

 Performance 
       Timeline  
ESCO Technologies 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 15 (%) 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.
Keysight Technologies 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Keysight Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Keysight Technologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

ESCO Technologies and Keysight Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ESCO Technologies and Keysight Technologies

The main advantage of trading using opposite ESCO Technologies and Keysight Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESCO Technologies position performs unexpectedly, Keysight Technologies 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 Keysight Technologies will offset losses from the drop in Keysight Technologies' long position.
The idea behind ESCO Technologies and Keysight Technologies 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.

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