Correlation Between Hexagon AB and ESCO Technologies

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

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

Diversification Opportunities for Hexagon AB and ESCO Technologies

-0.73

Correlation Coefficient

Hexagon AB  ESCO Technologies

Pay attention - limited upside

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

Pair Corralation between Hexagon AB and ESCO Technologies

Assuming the 90 days horizon Hexagon AB ADR is expected to generate 2.57 times more return on investment than ESCO Technologies. However, Hexagon AB is 2.57 times more volatile than ESCO Technologies. It trades about 0.29 of its potential returns per unit of risk. ESCO Technologies is currently generating about -0.15 per unit of risk. If you would invest  847.00  in Hexagon AB ADR on September 16, 2024 and sell it today you would earn a total of  124.00  from holding Hexagon AB ADR or generate 14.64% return on investment over 90 days.

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

Hexagon AB ADR  vs.  ESCO Technologies

Hexagon AB ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hexagon AB ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Hexagon AB is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

ESCO Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 11 (%) 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.

Pair Trading with Hexagon AB and ESCO Technologies

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

The idea behind Hexagon AB ADR and ESCO 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.