Correlation Between Hayward Holdings and Espey Mfg

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

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

Diversification Opportunities for Hayward Holdings and Espey Mfg

0.69

Correlation Coefficient

Hayward Holdings  Espey Mfg

Poor diversification

The 3 months correlation between Hayward and Espey is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hayward Holdings 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 Hayward Holdings 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 Hayward Holdings 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 Hayward Holdings i.e., Hayward Holdings and Espey Mfg go up and down completely randomly.

Pair Corralation between Hayward Holdings and Espey Mfg

Given the investment horizon of 90 days Hayward Holdings is expected to generate 3.16 times less return on investment than Espey Mfg. But when comparing it to its historical volatility, Hayward Holdings is 1.96 times less risky than Espey Mfg. It trades about 0.08 of its potential returns per unit of risk. Espey Mfg Electronics is currently generating about 0.13 of returns per unit of risk over similar time horizon. 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

Hayward Holdings  vs.  Espey Mfg Electronics

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.

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.

Pair Trading with Hayward Holdings and Espey Mfg

The main advantage of trading using opposite Hayward Holdings and Espey Mfg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hayward Holdings 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 Hayward Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.