Correlation Between King Resources and Espey Mfg

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

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

Diversification Opportunities for King Resources and Espey Mfg

0.16

Correlation Coefficient

King Resources  Espey Mfg

Average diversification

The 3 months correlation between King and Espey is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding King Resources 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 King Resources 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 King Resources 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 King Resources i.e., King Resources and Espey Mfg go up and down completely randomly.

Pair Corralation between King Resources and Espey Mfg

Given the investment horizon of 90 days King Resources is expected to generate 10.92 times more return on investment than Espey Mfg. However, King Resources is 10.92 times more volatile than Espey Mfg Electronics. It trades about 0.14 of its potential returns per unit of risk. Espey Mfg Electronics is currently generating about -0.15 per unit of risk. If you would invest  0.02  in King Resources on December 5, 2024 and sell it today you would earn a total of  0.00  from holding King Resources or generate 0.0% return on investment over 90 days.

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

King Resources  vs.  Espey Mfg Electronics

King Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in King Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, King Resources reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with King Resources and Espey Mfg

The main advantage of trading using opposite King Resources and Espey Mfg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if King Resources 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 King Resources 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.