Correlation Between Kadant and Generac Holdings
Can any of the company-specific risk be diversified away by investing in both Kadant and Generac 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 Kadant and Generac Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kadant Inc and Generac Holdings, you can compare the effects of market volatilities on Kadant and Generac 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 Kadant with a short position of Generac Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kadant and Generac Holdings.
Diversification Opportunities for Kadant and Generac Holdings
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kadant and Generac is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kadant Inc and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings and Kadant 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 Kadant Inc are associated (or correlated) with Generac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generac Holdings has no effect on the direction of Kadant i.e., Kadant and Generac Holdings go up and down completely randomly.
Pair Corralation between Kadant and Generac Holdings
Considering the 90-day investment horizon Kadant is expected to generate 1.01 times less return on investment than Generac Holdings. But when comparing it to its historical volatility, Kadant Inc is 1.54 times less risky than Generac Holdings. It trades about 0.1 of its potential returns per unit of risk. Generac Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9,429 in Generac Holdings on August 27, 2024 and sell it today you would earn a total of 9,479 from holding Generac Holdings or generate 100.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kadant Inc vs. Generac Holdings
Performance |
| Timeline |
| Kadant Inc |
| Generac Holdings |
Kadant and Generac Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kadant and Generac Holdings
The main advantage of trading using opposite Kadant and Generac Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kadant position performs unexpectedly, Generac 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 Generac Holdings will offset losses from the drop in Generac Holdings' long position.The idea behind Kadant Inc and Generac 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.| Generac Holdings vs. Emerson Electric | Generac Holdings vs. Eaton PLC | Generac Holdings vs. Parker Hannifin | Generac Holdings vs. Illinois Tool Works |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |