Correlation Between FREYR Battery and Espey Mfg

Can any of the company-specific risk be diversified away by investing in both FREYR Battery and Espey Mfg 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 FREYR Battery and Espey Mfg into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FREYR Battery SA and Espey Mfg Electronics, you can compare the effects of market volatilities on FREYR Battery and Espey Mfg 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 FREYR Battery with a short position of Espey Mfg. Check out your portfolio center. Please also check ongoing floating volatility patterns of FREYR Battery and Espey Mfg.

Diversification Opportunities for FREYR Battery and Espey Mfg

0.32

Correlation Coefficient

FREYR Battery  Espey Mfg

Weak diversification

The 3 months correlation between FREYR and Espey is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding FREYR Battery SA and Espey Mfg Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Espey Mfg Electronics and FREYR Battery 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 FREYR Battery SA are associated (or correlated) with Espey Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Espey Mfg Electronics has no effect on the direction of FREYR Battery i.e., FREYR Battery and Espey Mfg go up and down completely randomly.

Pair Corralation between FREYR Battery and Espey Mfg

Given the investment horizon of 90 days FREYR Battery SA is expected to under-perform the Espey Mfg. In addition to that, FREYR Battery is 1.48 times more volatile than Espey Mfg Electronics. It trades about -0.19 of its total potential returns per unit of risk. Espey Mfg Electronics is currently generating about -0.13 per unit of volatility. If you would invest  2,874  in Espey Mfg Electronics on December 4, 2024 and sell it today you would lose (269.00) from holding Espey Mfg Electronics or give up 9.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

FREYR Battery SA  vs.  Espey Mfg Electronics

FREYR Battery SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days FREYR Battery SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with FREYR Battery and Espey Mfg

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

The idea behind FREYR Battery SA and Espey Mfg 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.