Correlation Between ESCO Technologies and Vishay Precision

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

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

Diversification Opportunities for ESCO Technologies and Vishay Precision

0.22

Correlation Coefficient

ESCO Technologies  Vishay Precision

Modest diversification

The 3 months correlation between ESCO and Vishay is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Vishay Precision Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Precision 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 Vishay Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Precision has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Vishay Precision go up and down completely randomly.

Pair Corralation between ESCO Technologies and Vishay Precision

Considering the 90-day investment horizon ESCO Technologies is expected to generate 1.24 times more return on investment than Vishay Precision. However, ESCO Technologies is 1.24 times more volatile than Vishay Precision Group. It trades about 0.11 of its potential returns per unit of risk. Vishay Precision Group is currently generating about 0.05 per unit of risk. If you would invest  13,447  in ESCO Technologies on December 27, 2024 and sell it today you would earn a total of  2,511  from holding ESCO Technologies or generate 18.67% return on investment over 90 days.

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

ESCO Technologies  vs.  Vishay Precision Group

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.

Vishay Precision

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vishay Precision Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vishay Precision may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ESCO Technologies and Vishay Precision

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

The idea behind ESCO Technologies and Vishay Precision Group 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.