Correlation Between Espey Mfg and Preformed Line

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

Diversification Opportunities for Espey Mfg and Preformed Line

-0.23

Correlation Coefficient

Espey Mfg  Preformed Line

Very good diversification

The 3 months correlation between Espey and Preformed is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Preformed Line Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preformed Line Products 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 Preformed Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preformed Line Products has no effect on the direction of Espey Mfg i.e., Espey Mfg and Preformed Line go up and down completely randomly.

Pair Corralation between Espey Mfg and Preformed Line

Considering the 90-day investment horizon Espey Mfg Electronics is expected to under-perform the Preformed Line. In addition to that, Espey Mfg is 1.26 times more volatile than Preformed Line Products. It trades about -0.31 of its total potential returns per unit of risk. Preformed Line Products is currently generating about -0.07 per unit of volatility. If you would invest  13,248  in Preformed Line Products on March 10, 2024 and sell it today you would lose (440.00) from holding Preformed Line Products or give up 3.32% 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.  Preformed Line Products

Espey Mfg Electronics

Risk-Adjusted Performance

0 of 100

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 July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Preformed Line Products

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Preformed Line Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Preformed Line is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Espey Mfg and Preformed Line

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

The idea behind Espey Mfg Electronics and Preformed Line Products 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 Valuation module to check real value of public entities based on technical and fundamental data.