Correlation Between Haynes International and ESAB Corp

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

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

Diversification Opportunities for Haynes International and ESAB Corp

0.71

Correlation Coefficient

Haynes International  ESAB Corp

Poor diversification

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

Pair Corralation between Haynes International and ESAB Corp

Given the investment horizon of 90 days Haynes International is expected to generate 0.22 times more return on investment than ESAB Corp. However, Haynes International is 4.63 times less risky than ESAB Corp. It trades about 0.09 of its potential returns per unit of risk. ESAB Corp is currently generating about 0.01 per unit of risk. If you would invest  6,009  in Haynes International on January 25, 2024 and sell it today you would earn a total of  31.00  from holding Haynes International or generate 0.52% return on investment over 90 days.

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

Haynes International  vs.  ESAB Corp

Haynes International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Haynes International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Haynes International may actually be approaching a critical reversion point that can send shares even higher in May 2024.

ESAB Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ESAB Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ESAB Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Haynes International and ESAB Corp

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

The idea behind Haynes International and ESAB Corp 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.