Correlation Between Espey Mfg and ADS TEC

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

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

Diversification Opportunities for Espey Mfg and ADS TEC

0.11

Correlation Coefficient

Espey Mfg  ADS TEC

Average diversification

The 3 months correlation between Espey and ADS is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and ADS TEC ENERGY PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADS TEC ENERGY and Espey Mfg 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 Espey Mfg Electronics are associated (or correlated) with ADS TEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADS TEC ENERGY has no effect on the direction of Espey Mfg i.e., Espey Mfg and ADS TEC go up and down completely randomly.

Pair Corralation between Espey Mfg and ADS TEC

Considering the 90-day investment horizon Espey Mfg Electronics is expected to under-perform the ADS TEC. But the stock apears to be less risky and, when comparing its historical volatility, Espey Mfg Electronics is 1.95 times less risky than ADS TEC. The stock trades about -0.03 of its potential returns per unit of risk. The ADS TEC ENERGY PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  322.00  in ADS TEC ENERGY PLC on December 1, 2024 and sell it today you would earn a total of  9.00  from holding ADS TEC ENERGY PLC or generate 2.8% return on investment over 90 days.

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

Espey Mfg Electronics  vs.  ADS TEC ENERGY PLC

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 relatively invariable basic indicators, Espey Mfg is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ADS TEC ENERGY

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADS TEC ENERGY PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, ADS TEC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Espey Mfg and ADS TEC

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

The idea behind Espey Mfg Electronics and ADS TEC ENERGY PLC 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.