Correlation Between Nordson and Ametek

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

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

Diversification Opportunities for Nordson and Ametek

0.38

Correlation Coefficient

Nordson  Ametek

Weak diversification

The 3 months correlation between Nordson and Ametek is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nordson and Ametek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ametek Inc and Nordson 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 Nordson are associated (or correlated) with Ametek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ametek Inc has no effect on the direction of Nordson i.e., Nordson and Ametek go up and down completely randomly.

Pair Corralation between Nordson and Ametek

Given the investment horizon of 90 days Nordson is expected to under-perform the Ametek. But the stock apears to be less risky and, when comparing its historical volatility, Nordson is 1.28 times less risky than Ametek. The stock trades about -0.01 of its potential returns per unit of risk. The Ametek Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  16,699  in Ametek Inc on September 13, 2024 and sell it today you would earn a total of  2,161  from holding Ametek Inc or generate 12.94% return on investment over 90 days.

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

Nordson  vs.  Ametek Inc

Nordson

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Nordson has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Nordson is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Ametek Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Ametek exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nordson and Ametek

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

The idea behind Nordson and Ametek 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.