Correlation Between Standex International and Kadant

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

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

Diversification Opportunities for Standex International and Kadant

0.97

Correlation Coefficient

Standex International  Kadant

Almost no diversification

The 3 months correlation between Standex and Kadant is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Standex International and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc and Standex International 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 Standex International 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 Standex International i.e., Standex International and Kadant go up and down completely randomly.

Pair Corralation between Standex International and Kadant

Considering the 90-day investment horizon Standex International is expected to generate 1.2 times less return on investment than Kadant. In addition to that, Standex International is 1.12 times more volatile than Kadant Inc. It trades about 0.24 of its total potential returns per unit of risk. Kadant Inc is currently generating about 0.33 per unit of volatility. If you would invest  34,969  in Kadant Inc on September 5, 2024 and sell it today you would earn a total of  6,211  from holding Kadant Inc or generate 17.76% return on investment over 90 days.

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

Standex International  vs.  Kadant Inc

Standex International

Risk-Adjusted Performance

13 of 100

Good

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

Kadant Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kadant Inc are ranked lower than 18 (%) 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 Standex International and Kadant

The main advantage of trading using opposite Standex International and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standex International 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 Standex International 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.