Correlation Between Hurco Companies and Donaldson

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

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

Diversification Opportunities for Hurco Companies and Donaldson

-0.61

Correlation Coefficient

Hurco Companies  Donaldson

Excellent diversification

The 3 months correlation between Hurco and Donaldson is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hurco Companies and Donaldson in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Donaldson and Hurco Companies 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 Hurco Companies are associated (or correlated) with Donaldson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Donaldson has no effect on the direction of Hurco Companies i.e., Hurco Companies and Donaldson go up and down completely randomly.

Pair Corralation between Hurco Companies and Donaldson

Given the investment horizon of 90 days Hurco Companies is expected to under-perform the Donaldson. In addition to that, Hurco Companies is 2.86 times more volatile than Donaldson. It trades about -0.14 of its total potential returns per unit of risk. Donaldson is currently generating about -0.23 per unit of volatility. If you would invest  7,437  in Donaldson on January 20, 2024 and sell it today you would lose (246.00) from holding Donaldson or give up 3.31% of portfolio value over 90 days.

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

Hurco Companies  vs.  Donaldson

Hurco Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hurco Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Donaldson

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Donaldson are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Donaldson may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Hurco Companies and Donaldson

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

The idea behind Hurco Companies and Donaldson 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.