Correlation Between Chicago Rivet and Espey Mfg

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

By analyzing existing cross correlation between Chicago Rivet Machine and Espey Mfg Electronics, you can compare the effects of market volatilities on Chicago Rivet and Espey Mfg 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 Chicago Rivet with a short position of Espey Mfg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chicago Rivet and Espey Mfg.

Diversification Opportunities for Chicago Rivet and Espey Mfg

0.72

Correlation Coefficient

Chicago Rivet  Espey Mfg

Poor diversification

The 3 months correlation between Chicago and Espey is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Chicago Rivet Machine and Espey Mfg Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Espey Mfg Electronics and Chicago Rivet 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 Chicago Rivet Machine are associated (or correlated) with Espey Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Espey Mfg Electronics has no effect on the direction of Chicago Rivet i.e., Chicago Rivet and Espey Mfg go up and down completely randomly.

Pair Corralation between Chicago Rivet and Espey Mfg

Considering the 90-day investment horizon Chicago Rivet Machine is expected to under-perform the Espey Mfg. But the stock apears to be less risky and, when comparing its historical volatility, Chicago Rivet Machine is 1.09 times less risky than Espey Mfg. The stock trades about -0.1 of its potential returns per unit of risk. The Espey Mfg Electronics is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,997  in Espey Mfg Electronics on December 28, 2024 and sell it today you would lose (234.00) from holding Espey Mfg Electronics or give up 7.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Chicago Rivet Machine  vs.  Espey Mfg Electronics

Chicago Rivet Machine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chicago Rivet Machine has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Espey Mfg Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Espey Mfg Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Chicago Rivet and Espey Mfg

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

The idea behind Chicago Rivet Machine and Espey Mfg Electronics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.