Correlation Between Graco and Kadant

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

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

Diversification Opportunities for Graco and Kadant

0.65

Correlation Coefficient

Graco  Kadant

Poor diversification

The 3 months correlation between Graco and Kadant is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Graco Inc and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc and Graco 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 Graco Inc 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 Graco i.e., Graco and Kadant go up and down completely randomly.

Pair Corralation between Graco and Kadant

Considering the 90-day investment horizon Graco Inc is expected to generate 0.56 times more return on investment than Kadant. However, Graco Inc is 1.77 times less risky than Kadant. It trades about 0.02 of its potential returns per unit of risk. Kadant Inc is currently generating about 0.0 per unit of risk. If you would invest  8,387  in Graco Inc on December 27, 2024 and sell it today you would earn a total of  73.00  from holding Graco Inc or generate 0.87% return on investment over 90 days.

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

Graco Inc  vs.  Kadant Inc

Graco Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Graco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Kadant Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Graco and Kadant

The main advantage of trading using opposite Graco and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graco 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.

The idea behind Graco Inc and Kadant Inc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.