Correlation Between Standex International and Cummins
Can any of the company-specific risk be diversified away by investing in both Standex International and Cummins 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 Standex International and Cummins into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standex International and Cummins, you can compare the effects of market volatilities on Standex International and Cummins 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 Standex International with a short position of Cummins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standex International and Cummins.
Diversification Opportunities for Standex International and Cummins
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Standex and Cummins is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Standex International and Cummins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cummins and Standex 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 Standex International are associated (or correlated) with Cummins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cummins has no effect on the direction of Standex International i.e., Standex International and Cummins go up and down completely randomly.
Pair Corralation between Standex International and Cummins
Considering the 90-day investment horizon Standex International is expected to generate 1.3 times less return on investment than Cummins. In addition to that, Standex International is 1.24 times more volatile than Cummins. It trades about 0.07 of its total potential returns per unit of risk. Cummins is currently generating about 0.1 per unit of volatility. If you would invest 21,846 in Cummins on August 31, 2024 and sell it today you would earn a total of 15,658 from holding Cummins or generate 71.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Standex International vs. Cummins
Performance |
| Timeline |
| Standex International |
| Cummins |
Standex International and Cummins Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standex International and Cummins
The main advantage of trading using opposite Standex International and Cummins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standex International position performs unexpectedly, Cummins 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 Cummins will offset losses from the drop in Cummins' long position.| Standex International vs. Gorman Rupp | Standex International vs. Franklin Electric Co | Standex International vs. Omega Flex | Standex International vs. China Yuchai International |
| Cummins vs. Flowserve | Cummins vs. Franklin Electric Co | Cummins vs. Watts Water Technologies | Cummins vs. Gorman Rupp |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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