Correlation Between ESCO Technologies and Focus Universal

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

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

Diversification Opportunities for ESCO Technologies and Focus Universal

0.06

Correlation Coefficient

ESCO Technologies  Focus Universal

Significant diversification

The 3 months correlation between ESCO and Focus is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Focus Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Universal 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 Focus Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Universal has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Focus Universal go up and down completely randomly.

Pair Corralation between ESCO Technologies and Focus Universal

Considering the 90-day investment horizon ESCO Technologies is expected to generate 0.25 times more return on investment than Focus Universal. However, ESCO Technologies is 3.95 times less risky than Focus Universal. It trades about 0.06 of its potential returns per unit of risk. Focus Universal is currently generating about -0.07 per unit of risk. If you would invest  8,366  in ESCO Technologies on July 25, 2024 and sell it today you would earn a total of  4,383  from holding ESCO Technologies or generate 52.39% 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.  Focus Universal

ESCO Technologies

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ESCO Technologies is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Focus Universal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Universal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Focus Universal showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESCO Technologies and Focus Universal

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

The idea behind ESCO Technologies and Focus Universal 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.