Correlation Between Twin Disc and Nordson

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

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

Diversification Opportunities for Twin Disc and Nordson

0.44

Correlation Coefficient

Twin Disc  Nordson

Very weak diversification

The 3 months correlation between Twin and Nordson is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Twin Disc Incorporated and Nordson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordson and Twin Disc 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 Twin Disc Incorporated are associated (or correlated) with Nordson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordson has no effect on the direction of Twin Disc i.e., Twin Disc and Nordson go up and down completely randomly.

Pair Corralation between Twin Disc and Nordson

Given the investment horizon of 90 days Twin Disc is expected to generate 2.58 times less return on investment than Nordson. In addition to that, Twin Disc is 2.19 times more volatile than Nordson. It trades about 0.01 of its total potential returns per unit of risk. Nordson is currently generating about 0.06 per unit of volatility. If you would invest  25,018  in Nordson on September 2, 2024 and sell it today you would earn a total of  1,081  from holding Nordson or generate 4.32% return on investment over 90 days.

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

Twin Disc Incorporated  vs.  Nordson

Twin Disc

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Twin Disc and Nordson

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

The idea behind Twin Disc Incorporated and Nordson 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.