Correlation Between Kadant and Middleby Corp
Can any of the company-specific risk be diversified away by investing in both Kadant and Middleby Corp 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 Middleby Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kadant Inc and Middleby Corp, you can compare the effects of market volatilities on Kadant and Middleby Corp 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 Middleby Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kadant and Middleby Corp.
Diversification Opportunities for Kadant and Middleby Corp
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Kadant and Middleby is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kadant Inc and Middleby Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middleby Corp 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 Middleby Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middleby Corp has no effect on the direction of Kadant i.e., Kadant and Middleby Corp go up and down completely randomly.
Pair Corralation between Kadant and Middleby Corp
Considering the 90-day investment horizon Kadant Inc is expected to generate 0.89 times more return on investment than Middleby Corp. However, Kadant Inc is 1.12 times less risky than Middleby Corp. It trades about 0.56 of its potential returns per unit of risk. Middleby Corp is currently generating about 0.1 per unit of risk. If you would invest 32,215 in Kadant Inc on August 28, 2024 and sell it today you would earn a total of 9,653 from holding Kadant Inc or generate 29.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kadant Inc vs. Middleby Corp
Performance |
| Timeline |
| Kadant Inc |
| Middleby Corp |
Kadant and Middleby Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kadant and Middleby Corp
The main advantage of trading using opposite Kadant and Middleby Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kadant position performs unexpectedly, Middleby Corp 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 Middleby Corp will offset losses from the drop in Middleby Corp's long position.The idea behind Kadant Inc and Middleby Corp 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.| Middleby Corp vs. Aquagold International | Middleby Corp vs. Morningstar Unconstrained Allocation | Middleby Corp vs. High Yield Municipal Fund | Middleby Corp vs. Thrivent High Yield |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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