Correlation Between Watts Water and Kadant
Can any of the company-specific risk be diversified away by investing in both Watts Water 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 Watts Water and Kadant into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watts Water Technologies and Kadant Inc, you can compare the effects of market volatilities on Watts Water 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 Watts Water with a short position of Kadant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watts Water and Kadant.
Diversification Opportunities for Watts Water and Kadant
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Watts and Kadant is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Watts Water Technologies and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc and Watts Water 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 Watts Water Technologies 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 Watts Water i.e., Watts Water and Kadant go up and down completely randomly.
Pair Corralation between Watts Water and Kadant
Considering the 90-day investment horizon Watts Water is expected to generate 2.22 times less return on investment than Kadant. But when comparing it to its historical volatility, Watts Water Technologies is 1.47 times less risky than Kadant. It trades about 0.14 of its potential returns per unit of risk. Kadant Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 31,828 in Kadant Inc on August 28, 2024 and sell it today you would earn a total of 10,040 from holding Kadant Inc or generate 31.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Watts Water Technologies vs. Kadant Inc
Performance |
| Timeline |
| Watts Water Technologies |
| Kadant Inc |
Watts Water and Kadant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watts Water and Kadant
The main advantage of trading using opposite Watts Water and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watts Water 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.| Watts Water vs. IDEX Corporation | Watts Water vs. Donaldson | Watts Water vs. Gorman Rupp | Watts Water vs. Enerpac Tool Group |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |