Correlation Between Kadant and Helios Technologies

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

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

Diversification Opportunities for Kadant and Helios Technologies

0.78

Correlation Coefficient

Kadant  Helios Technologies

Poor diversification

The 3 months correlation between Kadant and Helios is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Kadant Inc and Helios Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helios Technologies and Kadant 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 Kadant Inc are associated (or correlated) with Helios Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helios Technologies has no effect on the direction of Kadant i.e., Kadant and Helios Technologies go up and down completely randomly.

Pair Corralation between Kadant and Helios Technologies

Considering the 90-day investment horizon Kadant Inc is expected to generate 0.8 times more return on investment than Helios Technologies. However, Kadant Inc is 1.25 times less risky than Helios Technologies. It trades about 0.21 of its potential returns per unit of risk. Helios Technologies is currently generating about 0.11 per unit of risk. If you would invest  32,081  in Kadant Inc on August 30, 2024 and sell it today you would earn a total of  10,212  from holding Kadant Inc or generate 31.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Kadant Inc  vs.  Helios Technologies

Kadant Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kadant Inc are ranked lower than 16 (%) 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.

Helios Technologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Helios Technologies are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Helios Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kadant and Helios Technologies

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

The idea behind Kadant Inc and Helios Technologies 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.