Correlation Between Espey Mfg and Exro Technologies

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

Diversification Opportunities for Espey Mfg and Exro Technologies

0.46

Correlation Coefficient

Espey Mfg  Exro Technologies

Very weak diversification

The 3 months correlation between Espey and Exro is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Exro Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exro Technologies 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 Exro Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exro Technologies has no effect on the direction of Espey Mfg i.e., Espey Mfg and Exro Technologies go up and down completely randomly.

Pair Corralation between Espey Mfg and Exro Technologies

Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 0.36 times more return on investment than Exro Technologies. However, Espey Mfg Electronics is 2.78 times less risky than Exro Technologies. It trades about -0.05 of its potential returns per unit of risk. Exro Technologies is currently generating about -0.02 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Espey Mfg Electronics  vs.  Exro Technologies

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.

Exro Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exro Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Espey Mfg and Exro Technologies

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

The idea behind Espey Mfg Electronics and Exro Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.