Correlation Between ESCO Technologies and Know Labs

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

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

Diversification Opportunities for ESCO Technologies and Know Labs

-0.34

Correlation Coefficient

ESCO Technologies  Know Labs

Very good diversification

The 3 months correlation between ESCO and Know is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding ESCO Technologies and Know Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Know Labs 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 Know Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Know Labs has no effect on the direction of ESCO Technologies i.e., ESCO Technologies and Know Labs go up and down completely randomly.

Pair Corralation between ESCO Technologies and Know Labs

Considering the 90-day investment horizon ESCO Technologies is expected to generate 0.29 times more return on investment than Know Labs. However, ESCO Technologies is 3.43 times less risky than Know Labs. It trades about 0.07 of its potential returns per unit of risk. Know Labs is currently generating about -0.14 per unit of risk. If you would invest  12,012  in ESCO Technologies on July 24, 2024 and sell it today you would earn a total of  714.00  from holding ESCO Technologies or generate 5.94% return on investment over 90 days.

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

ESCO Technologies  vs.  Know Labs

ESCO Technologies

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, ESCO Technologies may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Know Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Know Labs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in November 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with ESCO Technologies and Know Labs

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

The idea behind ESCO Technologies and Know Labs 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.