Correlation Between Espey Mfg and Kimball Electronics

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

Diversification Opportunities for Espey Mfg and Kimball Electronics

0.71

Correlation Coefficient

Espey Mfg  Kimball Electronics

Poor diversification

The 3 months correlation between Espey and Kimball is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Kimball Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kimball Electronics 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 Kimball Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kimball Electronics has no effect on the direction of Espey Mfg i.e., Espey Mfg and Kimball Electronics go up and down completely randomly.

Pair Corralation between Espey Mfg and Kimball Electronics

Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 1.21 times more return on investment than Kimball Electronics. However, Espey Mfg is 1.21 times more volatile than Kimball Electronics. It trades about -0.05 of its potential returns per unit of risk. Kimball Electronics is currently generating about -0.07 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	Significant
Accuracy	100.0%
Values	Daily Returns

Espey Mfg Electronics  vs.  Kimball Electronics

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.

Kimball Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kimball Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Espey Mfg and Kimball Electronics

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

The idea behind Espey Mfg Electronics and Kimball Electronics 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..