Correlation Between Hillenbrand and Middleby Corp

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

By analyzing existing cross correlation between Hillenbrand and Middleby Corp, you can compare the effects of market volatilities on Hillenbrand and Middleby Corp 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 Middleby Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hillenbrand and Middleby Corp.

Diversification Opportunities for Hillenbrand and Middleby Corp

0.16

Correlation Coefficient

Hillenbrand  Middleby Corp

Average diversification

The 3 months correlation between Hillenbrand and Middleby is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand and Middleby Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middleby Corp 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 Middleby Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middleby Corp has no effect on the direction of Hillenbrand i.e., Hillenbrand and Middleby Corp go up and down completely randomly.

Pair Corralation between Hillenbrand and Middleby Corp

Allowing for the 90-day total investment horizon Hillenbrand is expected to under-perform the Middleby Corp. In addition to that, Hillenbrand is 1.1 times more volatile than Middleby Corp. It trades about -0.11 of its total potential returns per unit of risk. Middleby Corp is currently generating about 0.09 per unit of volatility. If you would invest  13,559  in Middleby Corp on December 30, 2024 and sell it today you would earn a total of  1,717  from holding Middleby Corp or generate 12.66% return on investment over 90 days.

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

Hillenbrand  vs.  Middleby Corp

Hillenbrand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hillenbrand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Middleby Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Middleby Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Middleby Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hillenbrand and Middleby Corp

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

The idea behind Hillenbrand and Middleby Corp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.