Correlation Between Gorman Rupp and Enpro Industries

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

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

Diversification Opportunities for Gorman Rupp and Enpro Industries

0.81

Correlation Coefficient

Gorman Rupp  Enpro Industries

Very poor diversification

The 3 months correlation between Gorman and Enpro is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Gorman Rupp and Enpro Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enpro Industries and Gorman Rupp 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 Gorman Rupp are associated (or correlated) with Enpro Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enpro Industries has no effect on the direction of Gorman Rupp i.e., Gorman Rupp and Enpro Industries go up and down completely randomly.

Pair Corralation between Gorman Rupp and Enpro Industries

Considering the 90-day investment horizon Gorman Rupp is expected to generate 2.51 times less return on investment than Enpro Industries. But when comparing it to its historical volatility, Gorman Rupp is 1.09 times less risky than Enpro Industries. It trades about 0.02 of its potential returns per unit of risk. Enpro Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,413  in Enpro Industries on February 17, 2024 and sell it today you would earn a total of  5,520  from holding Enpro Industries or generate 58.64% return on investment over 90 days.

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

Gorman Rupp  vs.  Enpro Industries

Gorman Rupp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gorman Rupp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Enpro Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Gorman Rupp and Enpro Industries

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

The idea behind Gorman Rupp and Enpro Industries 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.