Correlation Between CVD Equipment and Nordson

Can any of the company-specific risk be diversified away by investing in both CVD Equipment and Nordson 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 CVD Equipment and Nordson into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVD Equipment and Nordson, you can compare the effects of market volatilities on CVD Equipment and Nordson 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 CVD Equipment with a short position of Nordson. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVD Equipment and Nordson.

Diversification Opportunities for CVD Equipment and Nordson

-0.46

Correlation Coefficient

CVD Equipment  Nordson

Very good diversification

The 3 months correlation between CVD and Nordson is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CVD Equipment and Nordson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordson and CVD Equipment 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 CVD Equipment are associated (or correlated) with Nordson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordson has no effect on the direction of CVD Equipment i.e., CVD Equipment and Nordson go up and down completely randomly.

Pair Corralation between CVD Equipment and Nordson

Considering the 90-day investment horizon CVD Equipment is expected to generate 2.74 times more return on investment than Nordson. However, CVD Equipment is 2.74 times more volatile than Nordson. It trades about 0.27 of its potential returns per unit of risk. Nordson is currently generating about -0.29 per unit of risk. If you would invest  320.00  in CVD Equipment on September 15, 2024 and sell it today you would earn a total of  106.00  from holding CVD Equipment or generate 33.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CVD Equipment  vs.  Nordson

CVD Equipment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVD Equipment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CVD Equipment showed solid returns over the last few months and may actually be approaching a breakup point.

Nordson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with CVD Equipment and Nordson

The main advantage of trading using opposite CVD Equipment and Nordson positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVD Equipment position performs unexpectedly, Nordson 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 Nordson will offset losses from the drop in Nordson's long position.

The idea behind CVD Equipment and Nordson 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.