Correlation Between ESCO Technologies and Cognex

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

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

Diversification Opportunities for ESCO Technologies and Cognex

0.13

Correlation Coefficient

ESCO Technologies  Cognex

Average diversification

The 3 months correlation between ESCO and Cognex is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Cognex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognex 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 Cognex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognex has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Cognex go up and down completely randomly.

Pair Corralation between ESCO Technologies and Cognex

Considering the 90-day investment horizon ESCO Technologies is expected to generate 2.5 times less return on investment than Cognex. But when comparing it to its historical volatility, ESCO Technologies is 2.03 times less risky than Cognex. It trades about 0.16 of its potential returns per unit of risk. Cognex is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,776  in Cognex on May 6, 2025 and sell it today you would earn a total of  1,271  from holding Cognex or generate 45.79% return on investment over 90 days.

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

ESCO Technologies  vs.  Cognex

ESCO Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 12 (%) 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.

Cognex

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cognex are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Cognex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESCO Technologies and Cognex

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

The idea behind ESCO Technologies and Cognex 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.