Correlation Between ESS Tech and Servotronics

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

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

Diversification Opportunities for ESS Tech and Servotronics

0.12

Correlation Coefficient

ESS Tech  Servotronics

Average diversification

The 3 months correlation between ESS and Servotronics is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding ESS Tech and Servotronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Servotronics and ESS Tech 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 ESS Tech are associated (or correlated) with Servotronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Servotronics has no effect on the direction of ESS Tech i.e., ESS Tech and Servotronics go up and down completely randomly.

Pair Corralation between ESS Tech and Servotronics

Considering the 90-day investment horizon ESS Tech is expected to generate 9.89 times less return on investment than Servotronics. But when comparing it to its historical volatility, ESS Tech is 2.57 times less risky than Servotronics. It trades about 0.05 of its potential returns per unit of risk. Servotronics is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,029  in Servotronics on May 16, 2025 and sell it today you would earn a total of  3,665  from holding Servotronics or generate 356.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	54.1%
Values	Daily Returns

ESS Tech  vs.  Servotronics

ESS Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESS Tech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, ESS Tech demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Servotronics

Risk-Adjusted Performance

Good

Over the last 90 days Servotronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Servotronics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESS Tech and Servotronics

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

The idea behind ESS Tech and Servotronics 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.