Correlation Between Regal Beloit and Kadant
Can any of the company-specific risk be diversified away by investing in both Regal Beloit and Kadant 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 Regal Beloit and Kadant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regal Beloit and Kadant Inc, you can compare the effects of market volatilities on Regal Beloit and Kadant 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 Regal Beloit with a short position of Kadant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regal Beloit and Kadant.
Diversification Opportunities for Regal Beloit and Kadant
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Regal and Kadant is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Regal Beloit and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc and Regal Beloit 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 Regal Beloit are associated (or correlated) with Kadant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kadant Inc has no effect on the direction of Regal Beloit i.e., Regal Beloit and Kadant go up and down completely randomly.
Pair Corralation between Regal Beloit and Kadant
Considering the 90-day investment horizon Regal Beloit is expected to generate 34.8 times less return on investment than Kadant. In addition to that, Regal Beloit is 1.15 times more volatile than Kadant Inc. It trades about 0.01 of its total potential returns per unit of risk. Kadant Inc is currently generating about 0.58 per unit of volatility. If you would invest 32,055 in Kadant Inc on August 30, 2024 and sell it today you would earn a total of 10,238 from holding Kadant Inc or generate 31.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Regal Beloit vs. Kadant Inc
Performance |
| Timeline |
| Regal Beloit |
| Kadant Inc |
Regal Beloit and Kadant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regal Beloit and Kadant
The main advantage of trading using opposite Regal Beloit and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regal Beloit position performs unexpectedly, Kadant 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 Kadant will offset losses from the drop in Kadant's long position.| Regal Beloit vs. Emerson Electric | Regal Beloit vs. Eaton PLC | Regal Beloit vs. Parker Hannifin | Regal Beloit 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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