Correlation Between Espey Mfg and FuelCell Energy

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

Diversification Opportunities for Espey Mfg and FuelCell Energy

0.55

Correlation Coefficient

Espey Mfg  FuelCell Energy

Very weak diversification

The 3 months correlation between Espey and FuelCell is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and FuelCell Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FuelCell 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 FuelCell Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FuelCell Energy has no effect on the direction of Espey Mfg i.e., Espey Mfg and FuelCell Energy go up and down completely randomly.

Pair Corralation between Espey Mfg and FuelCell Energy

Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 0.44 times more return on investment than FuelCell Energy. However, Espey Mfg Electronics is 2.27 times less risky than FuelCell Energy. It trades about -0.06 of its potential returns per unit of risk. FuelCell Energy is currently generating about -0.19 per unit of risk. If you would invest  2,997  in Espey Mfg Electronics on December 29, 2024 and sell it today you would lose (269.00) from holding Espey Mfg Electronics or give up 8.98% 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.  FuelCell Energy

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.

FuelCell Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days FuelCell Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 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 FuelCell Energy

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

The idea behind Espey Mfg Electronics and FuelCell Energy 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.