Correlation Between Zurn Elkay and Cadre Holdings

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

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

Diversification Opportunities for Zurn Elkay and Cadre Holdings

0.63

Correlation Coefficient

Zurn Elkay  Cadre Holdings

Poor diversification

The 3 months correlation between Zurn and Cadre is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Zurn Elkay Water and Cadre Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadre Holdings and Zurn Elkay 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 Zurn Elkay Water are associated (or correlated) with Cadre Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadre Holdings has no effect on the direction of Zurn Elkay i.e., Zurn Elkay and Cadre Holdings go up and down completely randomly.

Pair Corralation between Zurn Elkay and Cadre Holdings

Considering the 90-day investment horizon Zurn Elkay Water is expected to under-perform the Cadre Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Zurn Elkay Water is 1.48 times less risky than Cadre Holdings. The stock trades about -0.11 of its potential returns per unit of risk. The Cadre Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,197  in Cadre Holdings on December 27, 2024 and sell it today you would lose (160.00) from holding Cadre Holdings or give up 5.0% of portfolio value over 90 days.

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

Zurn Elkay Water  vs.  Cadre Holdings

Zurn Elkay Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Zurn Elkay Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Cadre Holdings

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Zurn Elkay and Cadre Holdings

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

The idea behind Zurn Elkay Water and Cadre Holdings 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 Directory module to find actively traded commodities issued by global exchanges.