Correlation Between Tennant and Kadant

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

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

Diversification Opportunities for Tennant and Kadant

-0.56

Correlation Coefficient

Tennant  Kadant

Excellent diversification

The 3 months correlation between Tennant and Kadant is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Tennant Company and Kadant Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kadant Inc and Tennant 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 Tennant Company 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 Tennant i.e., Tennant and Kadant go up and down completely randomly.

Pair Corralation between Tennant and Kadant

Considering the 90-day investment horizon Tennant Company is expected to under-perform the Kadant. But the stock apears to be less risky and, when comparing its historical volatility, Tennant Company is 1.18 times less risky than Kadant. The stock trades about -0.05 of its potential returns per unit of risk. The Kadant Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  31,359  in Kadant Inc on September 12, 2024 and sell it today you would earn a total of  6,716  from holding Kadant Inc or generate 21.42% return on investment over 90 days.

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

Tennant Company  vs.  Kadant Inc

Tennant Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tennant Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tennant is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Kadant Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kadant Inc are ranked lower than 11 (%) 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 Tennant and Kadant

The main advantage of trading using opposite Tennant and Kadant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tennant 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 Tennant Company 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.