Correlation Between CompX International and Espey Mfg

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

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

Diversification Opportunities for CompX International and Espey Mfg

-0.04

Correlation Coefficient

CompX International  Espey Mfg

Good diversification

The 3 months correlation between CompX and Espey is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CompX International 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 CompX International 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 CompX International 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 CompX International i.e., CompX International and Espey Mfg go up and down completely randomly.

Pair Corralation between CompX International and Espey Mfg

Considering the 90-day investment horizon CompX International is expected to generate 1.58 times less return on investment than Espey Mfg. In addition to that, CompX International is 1.16 times more volatile than Espey Mfg Electronics. It trades about 0.08 of its total potential returns per unit of risk. Espey Mfg Electronics is currently generating about 0.15 per unit of volatility. If you would invest  3,454  in Espey Mfg Electronics on May 13, 2025 and sell it today you would earn a total of  1,035  from holding Espey Mfg Electronics or generate 29.97% return on investment over 90 days.

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

CompX International  vs.  Espey Mfg Electronics

CompX International

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in CompX International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, CompX International showed solid returns over the last few months and may actually be approaching a breakup point.

Espey Mfg Electronics

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Espey Mfg Electronics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Espey Mfg reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CompX International and Espey Mfg

The main advantage of trading using opposite CompX International and Espey Mfg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompX International 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 CompX International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.