Correlation Between ESAB Corp and Haynes International

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

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

Diversification Opportunities for ESAB Corp and Haynes International

0.71

Correlation Coefficient

ESAB Corp  Haynes International

Poor diversification

The 3 months correlation between ESAB and Haynes is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding ESAB Corp and Haynes International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haynes International and ESAB Corp 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 ESAB Corp are associated (or correlated) with Haynes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haynes International has no effect on the direction of ESAB Corp i.e., ESAB Corp and Haynes International go up and down completely randomly.

Pair Corralation between ESAB Corp and Haynes International

Given the investment horizon of 90 days ESAB Corp is expected to under-perform the Haynes International. In addition to that, ESAB Corp is 4.68 times more volatile than Haynes International. It trades about -0.18 of its total potential returns per unit of risk. Haynes International is currently generating about -0.24 per unit of volatility. If you would invest  6,040  in Haynes International on February 4, 2024 and sell it today you would lose (116.00) from holding Haynes International or give up 1.92% of portfolio value over 90 days.

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

ESAB Corp  vs.  Haynes International

ESAB Corp

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ESAB Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, ESAB Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Haynes International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haynes International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Haynes International is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ESAB Corp and Haynes International

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

The idea behind ESAB Corp and Haynes International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.