Correlation Between Kadant and Hurco Companies

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

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

Diversification Opportunities for Kadant and Hurco Companies

0.58

Correlation Coefficient

Kadant  Hurco Companies

Very weak diversification

The 3 months correlation between Kadant and Hurco is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Kadant Inc and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies and Kadant 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 Kadant Inc are associated (or correlated) with Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of Kadant i.e., Kadant and Hurco Companies go up and down completely randomly.

Pair Corralation between Kadant and Hurco Companies

Considering the 90-day investment horizon Kadant Inc is expected to under-perform the Hurco Companies. But the stock apears to be less risky and, when comparing its historical volatility, Kadant Inc is 1.36 times less risky than Hurco Companies. The stock trades about -0.21 of its potential returns per unit of risk. The Hurco Companies is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  2,115  in Hurco Companies on September 21, 2024 and sell it today you would lose (196.00) from holding Hurco Companies or give up 9.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Kadant Inc  vs.  Hurco Companies

Kadant Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kadant Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Kadant is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Hurco Companies

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hurco Companies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Hurco Companies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kadant and Hurco Companies

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

The idea behind Kadant Inc and Hurco Companies 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.