Correlation Between Hillenbrand and Generac Holdings

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

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

Diversification Opportunities for Hillenbrand and Generac Holdings

0.6

Correlation Coefficient

Hillenbrand  Generac Holdings

Poor diversification

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

Pair Corralation between Hillenbrand and Generac Holdings

Allowing for the 90-day total investment horizon Hillenbrand is expected to under-perform the Generac Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Hillenbrand is 1.29 times less risky than Generac Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The Generac Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,880  in Generac Holdings on September 3, 2024 and sell it today you would earn a total of  8,940  from holding Generac Holdings or generate 90.49% return on investment over 90 days.

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

Hillenbrand  vs.  Generac Holdings

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.

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.

Pair Trading with Hillenbrand and Generac Holdings

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

The idea behind Hillenbrand and Generac Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.