Correlation Between Novanta and ESCO Technologies

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

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

Diversification Opportunities for Novanta and ESCO Technologies

0.49

Correlation Coefficient

Novanta  ESCO Technologies

Very weak diversification

The 3 months correlation between Novanta and ESCO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Novanta and ESCO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESCO Technologies and Novanta 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 Novanta are associated (or correlated) with ESCO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESCO Technologies has no effect on the direction of Novanta i.e., Novanta and ESCO Technologies go up and down completely randomly.

Pair Corralation between Novanta and ESCO Technologies

Given the investment horizon of 90 days Novanta is expected to generate 3.34 times less return on investment than ESCO Technologies. In addition to that, Novanta is 1.21 times more volatile than ESCO Technologies. It trades about 0.04 of its total potential returns per unit of risk. ESCO Technologies is currently generating about 0.18 per unit of volatility. If you would invest  16,346  in ESCO Technologies on May 7, 2025 and sell it today you would earn a total of  3,034  from holding ESCO Technologies or generate 18.56% return on investment over 90 days.

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

Novanta  vs.  ESCO Technologies

Novanta

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Novanta are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Novanta is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

ESCO Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ESCO Technologies are ranked lower than 14 (%) 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.

Pair Trading with Novanta and ESCO Technologies

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

The idea behind Novanta and ESCO Technologies 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.