Correlation Between Espey Mfg and Hubbell

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

Diversification Opportunities for Espey Mfg and Hubbell

0.83

Correlation Coefficient

Espey Mfg  Hubbell

Very poor diversification

The 3 months correlation between Espey and Hubbell is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Hubbell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubbell 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 Hubbell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubbell has no effect on the direction of Espey Mfg i.e., Espey Mfg and Hubbell go up and down completely randomly.

Pair Corralation between Espey Mfg and Hubbell

Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 2.18 times more return on investment than Hubbell. However, Espey Mfg is 2.18 times more volatile than Hubbell. It trades about 0.14 of its potential returns per unit of risk. Hubbell is currently generating about 0.19 per unit of risk. If you would invest  2,285  in Espey Mfg Electronics on September 2, 2024 and sell it today you would earn a total of  733.00  from holding Espey Mfg Electronics or generate 32.08% return on investment over 90 days.

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

Espey Mfg Electronics  vs.  Hubbell

Espey Mfg Electronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Espey Mfg Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Espey Mfg reported solid returns over the last few months and may actually be approaching a breakup point.

Hubbell

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hubbell are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental drivers, Hubbell sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Espey Mfg and Hubbell

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

The idea behind Espey Mfg Electronics and Hubbell 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.