Correlation Between Espey Mfg and Timken
Can any of the company-specific risk be diversified away by investing in both Espey Mfg and Timken 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 Timken 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 Timken Company, you can compare the effects of market volatilities on Espey Mfg and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Espey Mfg and Timken.
Diversification Opportunities for Espey Mfg and Timken
Good diversification
The 3 months correlation between Espey and Timken is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Espey Mfg i.e., Espey Mfg and Timken go up and down completely randomly.
Pair Corralation between Espey Mfg and Timken
Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 1.7 times more return on investment than Timken. However, Espey Mfg is 1.7 times more volatile than Timken Company. It trades about -0.04 of its potential returns per unit of risk. Timken Company is currently generating about -0.28 per unit of risk. If you would invest 2,856 in Espey Mfg Electronics on September 26, 2024 and sell it today you would lose (66.00) from holding Espey Mfg Electronics or give up 2.31% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Espey Mfg Electronics vs. Timken Company
Performance |
Timeline |
Espey Mfg Electronics |
Timken Company |
Espey Mfg and Timken Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Espey Mfg and Timken
The main advantage of trading using opposite Espey Mfg and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Espey Mfg position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken's long position.Espey Mfg vs. Pioneer Power Solutions | Espey Mfg vs. Ocean Power Technologies | Espey Mfg vs. Ideal Power | Espey Mfg vs. Expion360 |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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