Correlation Between Donaldson and IDEX

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

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

Diversification Opportunities for Donaldson and IDEX

0.43

Correlation Coefficient

Donaldson  IDEX

Very weak diversification

The 3 months correlation between Donaldson and IDEX is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Donaldson and IDEX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDEX and Donaldson 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 Donaldson are associated (or correlated) with IDEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDEX has no effect on the direction of Donaldson i.e., Donaldson and IDEX go up and down completely randomly.

Pair Corralation between Donaldson and IDEX

Considering the 90-day investment horizon Donaldson is expected to generate 0.72 times more return on investment than IDEX. However, Donaldson is 1.4 times less risky than IDEX. It trades about 0.01 of its potential returns per unit of risk. IDEX Corporation is currently generating about -0.13 per unit of risk. If you would invest  6,702  in Donaldson on December 28, 2024 and sell it today you would earn a total of  5.00  from holding Donaldson or generate 0.07% return on investment over 90 days.

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

Donaldson  vs.  IDEX Corp.

Donaldson

Risk-Adjusted Performance

Very Weak

Over the last 90 days Donaldson has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Donaldson is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

IDEX

Risk-Adjusted Performance

Very Weak

Over the last 90 days IDEX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Donaldson and IDEX

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

The idea behind Donaldson and IDEX Corporation 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.