Correlation Between Nordson and Dover

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

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

Diversification Opportunities for Nordson and Dover

0.67

Correlation Coefficient

Nordson  Dover

Poor diversification

The 3 months correlation between Nordson and Dover is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nordson and Dover in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dover and Nordson 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 Nordson are associated (or correlated) with Dover. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dover has no effect on the direction of Nordson i.e., Nordson and Dover go up and down completely randomly.

Pair Corralation between Nordson and Dover

Given the investment horizon of 90 days Nordson is expected to generate 1.15 times more return on investment than Dover. However, Nordson is 1.15 times more volatile than Dover. It trades about 0.17 of its potential returns per unit of risk. Dover is currently generating about 0.18 per unit of risk. If you would invest  20,853  in Nordson on October 23, 2024 and sell it today you would earn a total of  785.00  from holding Nordson or generate 3.76% return on investment over 90 days.

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

Nordson  vs.  Dover

Nordson

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Dover

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dover are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Dover is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nordson and Dover

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

The idea behind Nordson and Dover 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.