Correlation Between Taylor Devices and Kadant

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

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

Diversification Opportunities for Taylor Devices and Kadant

-0.32

Correlation Coefficient

Taylor Devices  Kadant

Very good diversification

The 3 months correlation between Taylor and Kadant is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Taylor Devices and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc and Taylor Devices 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 Taylor Devices 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 Taylor Devices i.e., Taylor Devices and Kadant go up and down completely randomly.

Pair Corralation between Taylor Devices and Kadant

Given the investment horizon of 90 days Taylor Devices is expected to under-perform the Kadant. In addition to that, Taylor Devices is 1.33 times more volatile than Kadant Inc. It trades about -0.15 of its total potential returns per unit of risk. Kadant Inc is currently generating about 0.0 per unit of volatility. If you would invest  35,047  in Kadant Inc on December 27, 2024 and sell it today you would lose (345.00) from holding Kadant Inc or give up 0.98% of portfolio value over 90 days.

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

Taylor Devices  vs.  Kadant Inc

Taylor Devices

Risk-Adjusted Performance

Very Weak

Over the last 90 days Taylor Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Kadant Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kadant Inc has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Taylor Devices and Kadant

The main advantage of trading using opposite Taylor Devices and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taylor Devices 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 Taylor Devices 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.