Correlation Between Espey Mfg and Enersys

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

Diversification Opportunities for Espey Mfg and Enersys

-0.4

Correlation Coefficient

Espey Mfg  Enersys

Very good diversification

The 3 months correlation between Espey and Enersys is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Enersys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enersys 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 Enersys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enersys has no effect on the direction of Espey Mfg i.e., Espey Mfg and Enersys go up and down completely randomly.

Pair Corralation between Espey Mfg and Enersys

Considering the 90-day investment horizon Espey Mfg Electronics is expected to under-perform the Enersys. In addition to that, Espey Mfg is 1.44 times more volatile than Enersys. It trades about -0.05 of its total potential returns per unit of risk. Enersys is currently generating about 0.03 per unit of volatility. If you would invest  9,260  in Enersys on December 28, 2024 and sell it today you would earn a total of  214.00  from holding Enersys or generate 2.31% return on investment over 90 days.

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

Espey Mfg Electronics  vs.  Enersys

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.

Enersys

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enersys are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Enersys is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Espey Mfg and Enersys

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

The idea behind Espey Mfg Electronics and Enersys 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.