Correlation Between Gorman Rupp and Donaldson

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

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

Diversification Opportunities for Gorman Rupp and Donaldson

0.28

Correlation Coefficient

Gorman Rupp  Donaldson

Modest diversification

The 3 months correlation between Gorman and Donaldson is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Gorman Rupp and Donaldson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donaldson and Gorman Rupp 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 Gorman Rupp are associated (or correlated) with Donaldson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donaldson has no effect on the direction of Gorman Rupp i.e., Gorman Rupp and Donaldson go up and down completely randomly.

Pair Corralation between Gorman Rupp and Donaldson

Considering the 90-day investment horizon Gorman Rupp is expected to under-perform the Donaldson. In addition to that, Gorman Rupp is 1.3 times more volatile than Donaldson. It trades about -0.06 of its total potential returns per unit of risk. Donaldson is currently generating about 0.01 per unit of volatility. If you would invest  6,702  in Donaldson on December 29, 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gorman Rupp  vs.  Donaldson

Gorman Rupp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gorman Rupp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gorman Rupp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Donaldson

Risk-Adjusted Performance

Insignificant

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.

Pair Trading with Gorman Rupp and Donaldson

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

The idea behind Gorman Rupp and Donaldson 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.