Correlation Between Espey Mfg and Hayward Holdings

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

Diversification Opportunities for Espey Mfg and Hayward Holdings

0.69

Correlation Coefficient

Espey Mfg  Hayward Holdings

Poor diversification

The 3 months correlation between Espey and Hayward is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Espey Mfg Electronics and Hayward Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hayward Holdings 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 Hayward Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hayward Holdings has no effect on the direction of Espey Mfg i.e., Espey Mfg and Hayward Holdings go up and down completely randomly.

Pair Corralation between Espey Mfg and Hayward Holdings

Considering the 90-day investment horizon Espey Mfg Electronics is expected to generate 1.96 times more return on investment than Hayward Holdings. However, Espey Mfg is 1.96 times more volatile than Hayward Holdings. It trades about 0.13 of its potential returns per unit of risk. Hayward Holdings is currently generating about 0.08 per unit of risk. If you would invest  2,297  in Espey Mfg Electronics on August 30, 2024 and sell it today you would earn a total of  705.00  from holding Espey Mfg Electronics or generate 30.69% return on investment over 90 days.

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

Espey Mfg Electronics  vs.  Hayward Holdings

Espey Mfg Electronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Espey Mfg Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Espey Mfg reported solid returns over the last few months and may actually be approaching a breakup point.

Hayward Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hayward Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Hayward Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Espey Mfg and Hayward Holdings

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

The idea behind Espey Mfg Electronics and Hayward Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.