Correlation Between Proto Labs and ESAB Corp

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

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

Diversification Opportunities for Proto Labs and ESAB Corp

0.04

Correlation Coefficient

Proto Labs  ESAB Corp

Significant diversification

The 3 months correlation between Proto and ESAB is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Proto Labs and ESAB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESAB Corp and Proto Labs 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 Proto Labs 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 Proto Labs i.e., Proto Labs and ESAB Corp go up and down completely randomly.

Pair Corralation between Proto Labs and ESAB Corp

Given the investment horizon of 90 days Proto Labs is expected to under-perform the ESAB Corp. In addition to that, Proto Labs is 1.04 times more volatile than ESAB Corp. It trades about -0.1 of its total potential returns per unit of risk. ESAB Corp is currently generating about -0.06 per unit of volatility. If you would invest  9,952  in ESAB Corp on March 12, 2024 and sell it today you would lose (657.50) from holding ESAB Corp or give up 6.61% of portfolio value over 90 days.

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

Proto Labs  vs.  ESAB Corp

Proto Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Proto Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ESAB Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESAB Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ESAB Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Proto Labs and ESAB Corp

The main advantage of trading using opposite Proto Labs and ESAB Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proto Labs 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 Proto Labs 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.