Correlation Between Espey Mfg and Stanley Black

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

Diversification Opportunities for Espey Mfg and Stanley Black

-0.04

Correlation Coefficient

Espey Mfg  Stanley Black

Good diversification

The 3 months correlation between Espey and Stanley is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Stanley Black Decker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Black Decker 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 Stanley Black. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Black Decker has no effect on the direction of Espey Mfg i.e., Espey Mfg and Stanley Black go up and down completely randomly.

Pair Corralation between Espey Mfg and Stanley Black

Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 1.28 times more return on investment than Stanley Black. However, Espey Mfg is 1.28 times more volatile than Stanley Black Decker. It trades about 0.06 of its potential returns per unit of risk. Stanley Black Decker is currently generating about 0.0 per unit of risk. If you would invest  1,518  in Espey Mfg Electronics on September 27, 2024 and sell it today you would earn a total of  1,356  from holding Espey Mfg Electronics or generate 89.33% return on investment over 90 days.

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

Espey Mfg Electronics  vs.  Stanley Black Decker

Espey Mfg Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Espey Mfg Electronics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Espey Mfg reported solid returns over the last few months and may actually be approaching a breakup point.

Stanley Black Decker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stanley Black Decker 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 basic indicators remain quite persistent which may send shares a bit higher in January 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 Stanley Black

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

The idea behind Espey Mfg Electronics and Stanley Black Decker 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.