Correlation Between Gorman Rupp and Kadant

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

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

Diversification Opportunities for Gorman Rupp and Kadant

0.92

Correlation Coefficient

Gorman Rupp  Kadant

Almost no diversification

The 3 months correlation between Gorman and Kadant is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Gorman Rupp and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc 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 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 Gorman Rupp i.e., Gorman Rupp and Kadant go up and down completely randomly.

Pair Corralation between Gorman Rupp and Kadant

Considering the 90-day investment horizon Gorman Rupp is expected to generate 2.52 times less return on investment than Kadant. But when comparing it to its historical volatility, Gorman Rupp is 1.17 times less risky than Kadant. It trades about 0.08 of its potential returns per unit of risk. Kadant Inc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  32,081  in Kadant Inc on August 30, 2024 and sell it today you would earn a total of  8,265  from holding Kadant Inc or generate 25.76% return on investment over 90 days.

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

Gorman Rupp  vs.  Kadant Inc

Gorman Rupp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gorman Rupp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Gorman Rupp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Kadant Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kadant Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Kadant demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gorman Rupp and Kadant

The main advantage of trading using opposite Gorman Rupp and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gorman Rupp 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 Gorman Rupp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..