Correlation Between Nordson and CVD Equipment

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

By analyzing existing cross correlation between Nordson and CVD Equipment, you can compare the effects of market volatilities on Nordson and CVD Equipment 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 CVD Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nordson and CVD Equipment.

Diversification Opportunities for Nordson and CVD Equipment

-0.22

Correlation Coefficient

Nordson  CVD Equipment

Very good diversification

The 3 months correlation between Nordson and CVD is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nordson and CVD Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVD Equipment 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 CVD Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVD Equipment has no effect on the direction of Nordson i.e., Nordson and CVD Equipment go up and down completely randomly.

Pair Corralation between Nordson and CVD Equipment

Given the investment horizon of 90 days Nordson is expected to generate 4.07 times less return on investment than CVD Equipment. But when comparing it to its historical volatility, Nordson is 3.24 times less risky than CVD Equipment. It trades about 0.14 of its potential returns per unit of risk. CVD Equipment is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  291.00  in CVD Equipment on September 5, 2024 and sell it today you would earn a total of  51.00  from holding CVD Equipment or generate 17.53% return on investment over 90 days.

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

Nordson  vs.  CVD Equipment

Nordson

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nordson are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

CVD Equipment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVD Equipment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CVD Equipment is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nordson and CVD Equipment

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

The idea behind Nordson and CVD Equipment 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.