Correlation Between Espey Mfg and Pioneer Power

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

Diversification Opportunities for Espey Mfg and Pioneer Power

0.75

Correlation Coefficient

Espey Mfg  Pioneer Power

Poor diversification

The 3 months correlation between Espey and Pioneer is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Pioneer Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Power Solutions 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 Pioneer Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Power Solutions has no effect on the direction of Espey Mfg i.e., Espey Mfg and Pioneer Power go up and down completely randomly.

Pair Corralation between Espey Mfg and Pioneer Power

Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 0.82 times more return on investment than Pioneer Power. However, Espey Mfg Electronics is 1.22 times less risky than Pioneer Power. It trades about -0.06 of its potential returns per unit of risk. Pioneer Power Solutions is currently generating about -0.15 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 (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	Significant
Accuracy	100.0%
Values	Daily Returns

Espey Mfg Electronics  vs.  Pioneer Power Solutions

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.

Pioneer Power Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pioneer Power Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Espey Mfg and Pioneer Power

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

The idea behind Espey Mfg Electronics and Pioneer Power Solutions 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.