Correlation Between ESCO Technologies and Microvision

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

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

Diversification Opportunities for ESCO Technologies and Microvision

-0.8

Correlation Coefficient

ESCO Technologies  Microvision

Pay attention - limited upside

The 3 months correlation between ESCO and Microvision is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Microvision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microvision 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 Microvision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microvision has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Microvision go up and down completely randomly.

Pair Corralation between ESCO Technologies and Microvision

Considering the 90-day investment horizon ESCO Technologies is expected to under-perform the Microvision. But the stock apears to be less risky and, when comparing its historical volatility, ESCO Technologies is 3.12 times less risky than Microvision. The stock trades about -0.34 of its potential returns per unit of risk. The Microvision is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  102.00  in Microvision on September 23, 2024 and sell it today you would lose (3.00) from holding Microvision or give up 2.94% of portfolio value over 90 days.

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

ESCO Technologies  vs.  Microvision

ESCO Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ESCO Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Microvision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microvision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Microvision is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ESCO Technologies and Microvision

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

The idea behind ESCO Technologies and Microvision 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.