Correlation Between Mayville Engineering and ESAB Corp

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

By analyzing existing cross correlation between Mayville Engineering Co and ESAB Corp, you can compare the effects of market volatilities on Mayville Engineering and ESAB Corp 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 Mayville Engineering with a short position of ESAB Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mayville Engineering and ESAB Corp.

Diversification Opportunities for Mayville Engineering and ESAB Corp

0.37

Correlation Coefficient

Mayville Engineering  ESAB Corp

Weak diversification

The 3 months correlation between Mayville and ESAB is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Mayville Engineering Co and ESAB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAB Corp and Mayville Engineering 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 Mayville Engineering Co are associated (or correlated) with ESAB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESAB Corp has no effect on the direction of Mayville Engineering i.e., Mayville Engineering and ESAB Corp go up and down completely randomly.

Pair Corralation between Mayville Engineering and ESAB Corp

Considering the 90-day investment horizon Mayville Engineering Co is expected to under-perform the ESAB Corp. But the stock apears to be less risky and, when comparing its historical volatility, Mayville Engineering Co is 1.04 times less risky than ESAB Corp. The stock trades about -0.11 of its potential returns per unit of risk. The ESAB Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  12,011  in ESAB Corp on December 28, 2024 and sell it today you would lose (427.00) from holding ESAB Corp or give up 3.56% of portfolio value over 90 days.

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

Mayville Engineering Co  vs.  ESAB Corp

Mayville Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mayville Engineering Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ESAB Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ESAB Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ESAB Corp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mayville Engineering and ESAB Corp

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

The idea behind Mayville Engineering Co and ESAB Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.