Correlation Between Espey Mfg and Eastern

Can any of the company-specific risk be diversified away by investing in both Espey Mfg and Eastern 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 Eastern 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 Eastern Co, you can compare the effects of market volatilities on Espey Mfg and Eastern 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 Eastern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Espey Mfg and Eastern.

Diversification Opportunities for Espey Mfg and Eastern

-0.01

Correlation Coefficient

Espey Mfg  Eastern

Good diversification

The 3 months correlation between Espey and Eastern is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern 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 Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Espey Mfg i.e., Espey Mfg and Eastern go up and down completely randomly.

Pair Corralation between Espey Mfg and Eastern

Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 0.89 times more return on investment than Eastern. However, Espey Mfg Electronics is 1.12 times less risky than Eastern. It trades about 0.03 of its potential returns per unit of risk. Eastern Co is currently generating about -0.09 per unit of risk. If you would invest  2,975  in Espey Mfg Electronics on September 28, 2024 and sell it today you would earn a total of  27.00  from holding Espey Mfg Electronics or generate 0.91% return on investment over 90 days.

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

Espey Mfg Electronics  vs.  Eastern Co

Espey Mfg Electronics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Espey Mfg Electronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Espey Mfg is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Espey Mfg and Eastern

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

The idea behind Espey Mfg Electronics and Eastern Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.