Correlation Between Servotronics and Espey Mfg

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

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

Diversification Opportunities for Servotronics and Espey Mfg

-0.09

Correlation Coefficient

Servotronics  Espey Mfg

Good diversification

The 3 months correlation between Servotronics and Espey is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Servotronics 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 Servotronics 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 Servotronics 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 Servotronics i.e., Servotronics and Espey Mfg go up and down completely randomly.

Pair Corralation between Servotronics and Espey Mfg

Considering the 90-day investment horizon Servotronics is expected to generate 23.41 times more return on investment than Espey Mfg. However, Servotronics is 23.41 times more volatile than Espey Mfg Electronics. It trades about 0.06 of its potential returns per unit of risk. Espey Mfg Electronics is currently generating about 0.1 per unit of risk. If you would invest  1,189  in Servotronics on February 15, 2025 and sell it today you would lose (139.00) from holding Servotronics or give up 11.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.93%
Values	Daily Returns

Servotronics  vs.  Espey Mfg Electronics

Servotronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Servotronics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Servotronics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Espey Mfg Electronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Espey Mfg Electronics are ranked lower than 13 (%) 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 Servotronics and Espey Mfg

The main advantage of trading using opposite Servotronics and Espey Mfg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Servotronics 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 Servotronics 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.