Correlation Between Mueller Industries and ESAB Corp

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

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

Diversification Opportunities for Mueller Industries and ESAB Corp

0.31

Correlation Coefficient

Mueller Industries  ESAB Corp

Weak diversification

The 3 months correlation between Mueller and ESAB is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and ESAB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAB Corp and Mueller Industries 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 Mueller Industries 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 Mueller Industries i.e., Mueller Industries and ESAB Corp go up and down completely randomly.

Pair Corralation between Mueller Industries and ESAB Corp

Considering the 90-day investment horizon Mueller Industries is expected to under-perform the ESAB Corp. But the stock apears to be less risky and, when comparing its historical volatility, Mueller Industries is 1.2 times less risky than ESAB Corp. The stock trades about -0.02 of its potential returns per unit of risk. The ESAB Corp is currently generating about 0.01 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 earn a total of  34.00  from holding ESAB Corp or generate 0.28% return on investment over 90 days.

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

Mueller Industries  vs.  ESAB Corp

Mueller Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mueller Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Mueller Industries is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 Mueller Industries and ESAB Corp

The main advantage of trading using opposite Mueller Industries and ESAB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mueller Industries 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 Mueller Industries 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 CEOs Directory module to screen CEOs from public companies around the world.