Correlation Between Espey Mfg and Legrand SA

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

Diversification Opportunities for Espey Mfg and Legrand SA

-0.67

Correlation Coefficient

Espey Mfg  Legrand SA

Excellent diversification

The 3 months correlation between Espey and Legrand is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Legrand SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legrand SA ADR 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 Legrand SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legrand SA ADR has no effect on the direction of Espey Mfg i.e., Espey Mfg and Legrand SA go up and down completely randomly.

Pair Corralation between Espey Mfg and Legrand SA

Considering the 90-day investment horizon Espey Mfg Electronics is expected to under-perform the Legrand SA. In addition to that, Espey Mfg is 1.04 times more volatile than Legrand SA ADR. It trades about -0.06 of its total potential returns per unit of risk. Legrand SA ADR is currently generating about 0.09 per unit of volatility. If you would invest  1,940  in Legrand SA ADR on December 28, 2024 and sell it today you would earn a total of  215.00  from holding Legrand SA ADR or generate 11.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Espey Mfg Electronics  vs.  Legrand SA ADR

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.

Legrand SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legrand SA ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Legrand SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Espey Mfg and Legrand SA

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

The idea behind Espey Mfg Electronics and Legrand SA ADR 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.