Correlation Between Vontier Corp and Electro Sensors

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

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

Diversification Opportunities for Vontier Corp and Electro Sensors

0.07

Correlation Coefficient

Vontier Corp  Electro Sensors

Significant diversification

The 3 months correlation between Vontier and Electro is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Vontier Corp and Electro Sensors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electro Sensors and Vontier 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 Vontier Corp are associated (or correlated) with Electro Sensors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electro Sensors has no effect on the direction of Vontier Corp i.e., Vontier Corp and Electro Sensors go up and down completely randomly.

Pair Corralation between Vontier Corp and Electro Sensors

Considering the 90-day investment horizon Vontier Corp is expected to under-perform the Electro Sensors. But the stock apears to be less risky and, when comparing its historical volatility, Vontier Corp is 1.54 times less risky than Electro Sensors. The stock trades about -0.1 of its potential returns per unit of risk. The Electro Sensors is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  408.00  in Electro Sensors on March 4, 2024 and sell it today you would lose (2.00) from holding Electro Sensors or give up 0.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Vontier Corp  vs.  Electro Sensors

Vontier Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vontier Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Electro Sensors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electro Sensors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Electro Sensors is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vontier Corp and Electro Sensors

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

The idea behind Vontier Corp and Electro Sensors 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.