Correlation Between Generac Holdings and Hillenbrand

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

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

Diversification Opportunities for Generac Holdings and Hillenbrand

0.6

Correlation Coefficient

Generac Holdings  Hillenbrand

Poor diversification

The 3 months correlation between Generac and Hillenbrand is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Generac Holdings and Hillenbrand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillenbrand and Generac Holdings 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 Generac Holdings are associated (or correlated) with Hillenbrand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillenbrand has no effect on the direction of Generac Holdings i.e., Generac Holdings and Hillenbrand go up and down completely randomly.

Pair Corralation between Generac Holdings and Hillenbrand

Given the investment horizon of 90 days Generac Holdings is expected to generate 2.07 times less return on investment than Hillenbrand. But when comparing it to its historical volatility, Generac Holdings is 1.86 times less risky than Hillenbrand. It trades about 0.24 of its potential returns per unit of risk. Hillenbrand is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,798  in Hillenbrand on September 3, 2024 and sell it today you would earn a total of  605.00  from holding Hillenbrand or generate 21.62% return on investment over 90 days.

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

Generac Holdings  vs.  Hillenbrand

Generac Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Generac Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Generac Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hillenbrand

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hillenbrand are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Hillenbrand may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Generac Holdings and Hillenbrand

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

The idea behind Generac Holdings and Hillenbrand 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.