Graham Corp’s Upside Edge Amid a History of Deep Drawdowns

Why the current low‑volatility bear regime could unlock asymmetric returns despite lingering risk flags

GHM Graham Corporation

In this report

01

Returns Overview

Period returns, alpha, cumulative performance, distributions

P. 2-3

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02

Volatility Analysis

Annualized volatility, downside deviation, drawdowns

P. 4-5

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03

Beta & Correlation

Trailing, upside, downside beta, systematic risk

P. 6-7

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04

Risk-Adjusted Returns

Sharpe, Sortino, Calmar, Information, Treynor

P. 8-9

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05

Market Regime Analysis

Bull/bear behavior, capture ratios

P. 10-11

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06

Investment Highlights & Risk Summary

Executive summary, risk flags, rankings

P. 12-13

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Returns Overview

Graham Corporation (GHM) — Return Performance

Graham Corporation (GHM) delivered a highly volatile return profile, swinging from a 23.9% loss over the past month to a 599.5% gain over five years. The short‑term performance was negative (-23.89% MTD, -1.03% QTD) while medium‑term horizons turned sharply positive, with a 34.75% six‑month gain and a 64.86% one‑year return, indicating a pronounced rebound after the recent dip.

Period Returns vs S&P 500 & XLI

Monthly Returns Heatmap

GHM

Alpha generation was robust across all horizons: the stock outperformed its sector ETF by 23.06% on a monthly basis and by 46.62% over one year, reflecting strong relative upside. The divergence between short‑term negative returns and long‑term explosive growth highlights a potential turnaround catalyst that has already delivered sizable gains in the past six months.

Returns Overview

Graham Corporation (GHM) — Return Charts

Volatility Analysis

Graham Corporation (GHM) — Volatility Profile

Graham Corporation exhibits markedly higher price variability than the broader market, with an annualized volatility of 44.56% compared to the S&P 500’s 17.73%, indicating more than double the typical swing in returns. The firm’s downside risk metrics are pronounced: a downside deviation of 29.53% and a historical maximum drawdown of -74.83% over a four‑year period, reflecting both deep losses and an extended recovery timeline that spanned roughly six years. Recent short‑term volatility remains elevated; the 60‑day vol of 63.09% exceeds the long‑term 252‑day average of 56.02%, suggesting that current market conditions or company‑specific factors are amplifying price swings beyond the historical norm.

Volatility Metrics

GHM

Graham Corporation’s volatility profile is significantly more aggressive than the S&P 500 benchmark, with annualized volatility more than two and a half times higher. The downside deviation of 29.53% signals that negative returns are both frequent and severe, while the -74.83% max drawdown—spanning from August 2018 to July 2022—demonstrates vulnerability to prolonged equity erosion. Although the stock has begun to recover (noted on March 22 2024), the 60‑day volatility of 63.09% remains above its 252‑day average of 56.02%, indicating that short‑term risk is currently heightened relative to its own historical baseline.

Annualized volatility of GHM (44.56%) is 151% higher than the S&P 500’s 17.73%.
Downside deviation of 29.53% points to substantial asymmetry in loss potential.
Maximum drawdown of -74.83% lasted nearly four years, highlighting deep and prolonged equity stress.
Current 60‑day volatility (63.09%) exceeds the long‑term 252‑day average (56.02%), indicating elevated short‑term risk.
Recovery from the historic trough began in early 2024, but full upside potential remains uncertain.

Positive Characteristics
The stock has already initiated a recovery after its deepest drawdown, suggesting resilience.
Despite high volatility, the long‑term upward trend since the 2022 trough could offer attractive risk‑adjusted returns for investors with higher risk tolerance.

Volatility Analysis

Graham Corporation (GHM) — Volatility & Drawdown Charts

Beta & Correlation

Graham Corporation (GHM) — Beta Profile

Graham Corporation (GHM) exhibits a trailing beta of 0.911 versus the S&P 500, placing it squarely in the market‑like range (0.8‑1.2). This suggests that the stock’s price moves roughly in line with overall market fluctuations, offering neither pronounced defensive cushioning nor aggressive leverage. Its sector beta of 0.901 against the Industrials index (XLI) is marginally lower than the market beta, indicating that a slightly larger share of GHM’s volatility stems from broad‑market forces rather than pure industrial sector dynamics. The upside and downside betas are identical at 0.79, reflecting symmetric sensitivity to positive and negative market moves; the stock does not exhibit a pronounced tilt toward either side of market cycles. An R‑squared of 13.1% against the S&P 500 underscores that only a modest portion of GHM’s returns is explained by market movements, leaving 86.9% as idiosyncratic variance that can be diversified away. Compared with its sector benchmark, the sector R² of 15.7% and correlation of 0.396 further confirm that while industrial trends have some influence, the majority of GHM’s risk profile is company‑specific.

Beta & Correlation Metrics

GHM

The trailing market beta of 0.911 indicates that Graham Corporation tracks the S&P 500 closely but with slightly muted amplitude, aligning it with a neutral risk stance rather than defensive or aggressive positioning. Identical upside and downside betas (0.79) signal balanced exposure to market rallies and drawdowns, which simplifies risk budgeting for investors who seek symmetric performance across regimes. The low R‑squared (13.1%) means most of the stock’s price action is driven by firm‑specific factors, offering diversification benefits within a broader portfolio, while the sector beta of 0.901 and sector correlation of 0.396 reveal that industrial cycle exposure accounts for only a fraction of its total risk.

Trailing market beta (0.911) places GHM in the market‑like range, indicating proportional movement with the S&P 500.
Upside and downside betas are equal (0.79), showing no asymmetry in response to positive versus negative market moves.
R‑squared of 13.1% vs the market implies that 86.9% of return variance is idiosyncratic, enhancing diversification potential.
Sector beta (0.901) is slightly lower than market beta, suggesting modest additional risk from industrial sector trends.
Sector correlation (0.396) and sector R² (15.7%) confirm that sector dynamics explain a small share of total variance.

Positive Characteristics
Symmetric upside/downside betas simplify risk management across market cycles.
High idiosyncratic risk (86.9%) offers diversification benefits for multi‑asset portfolios.
Beta values below 1 reduce exposure to broad market volatility while maintaining market‑like returns.

Beta & Correlation

Graham Corporation (GHM) — Rolling Beta

Positive Notes

Symmetric upside/downside betas simplify risk management across market cycles.

High idiosyncratic risk (86.9%) offers diversification benefits for multi‑asset portfolios.

Beta values below 1 reduce exposure to broad market volatility while maintaining market‑like returns.

Risk-Adjusted Returns

Graham Corporation (GHM) — Risk-Adjusted Performance

Graham Corporation (GHM) delivers modest risk-adjusted performance as indicated by its Sharpe ratio of 0.407, well below the benchmark threshold of 1.0 for a satisfactory risk‑adjusted return. The Sortino ratio of 0.614 exceeds the Sharpe figure, suggesting that the equity’s downside volatility is lower than its overall volatility and that investors have been partially insulated from adverse price swings. However, the Calmar ratio of 0.291 signals that the firm’s cumulative returns are modest relative to its worst historical drawdown, while an Information Ratio of 0.218 points to only limited consistency in generating alpha above a relevant benchmark.

Risk-free rate: 3.63% (Fed Funds Rate)

Risk-Adjusted Metrics

GHM

The Sharpe ratio of 0.407 indicates that GHM’s excess return over the risk‑free rate is less than half a unit per unit of total volatility, reflecting relatively low reward for the amount of market risk borne. In contrast, the Sortino ratio of 0.614 shows a more favorable risk‑adjusted profile when focusing solely on downside deviation, implying that adverse price movements have been comparatively muted. The Calmar ratio of 0.291 reveals that the firm’s peak‑to‑trough drawdown has eroded a substantial portion of its gains, highlighting vulnerability during market stress. An Information Ratio of 0.218 suggests modest but positive alpha generation, though it falls short of the 0.5 benchmark for consistent outperformance.

Sharpe ratio is well below 1.0, indicating limited reward per unit of total risk.
Sortino exceeds Sharpe, pointing to a relatively benign downside volatility profile.
Calmar ratio under 0.3 reflects significant drawdown severity relative to returns.
Information Ratio of 0.218 shows modest but positive alpha generation.

Positive Characteristics
The Sortino ratio suggests the stock has managed downside risk better than its overall volatility would imply.
A positive Information Ratio indicates that active management has added some value above the benchmark.

Risk-Adjusted Returns

Graham Corporation (GHM) — Rolling Sharpe & Sortino

Positive Notes

The Sortino ratio suggests the stock has managed downside risk better than its overall volatility would imply.

A positive Information Ratio indicates that active management has added some value above the benchmark.

Market Regime Analysis

Graham Corporation (GHM) — Regime Behavior

Graham Corporation (GHM) demonstrates a pronounced sensitivity to market regimes, delivering strong positive returns in bullish environments while limiting losses during bearish periods. In Bull-LowVol conditions the stock generates an average monthly gain of 2.33%, reflecting modest outperformance when markets are calm and rising; this performance escalates to 6.18% per month in Bull-HighVol settings, indicating that GHM benefits from heightened volatility amid upward trends. Conversely, during Bear-LowVol phases the company posts a modest decline of -2.95% monthly, and even in the more turbulent Bear-HighVol regime the loss widens slightly to -3.72%, underscoring its defensive character relative to broader market downturns.

Current Market Regime: Bear-LowVol

Bull-LowVol = calm uptrend • Bull-HighVol = volatile uptrend • Bear-LowVol = orderly decline • Bear-HighVol = crisis

Regime Returns & Capture Ratios

GHM

Across the four defined regimes, GHM’s upside capture of 102.4% shows that it participates fully in market rallies, slightly exceeding the S&P 500’s gains on average. Its downside capture of only 33.6% translates to a three‑fold advantage: for every point the market falls, GHM loses roughly one‑third as much, delivering a capture ratio of 3.05—a strong defensive metric. In the current Bear-LowVol environment, the stock’s historical -2.95% monthly return suggests limited downside exposure, and its low downside capture implies that it should continue to outperform the broader market decline while preserving capital.

Market Regime Analysis

Graham Corporation (GHM) — Regime & Capture Charts

Regime Timeline

GHM’s upside capture exceeds 100%, indicating full participation in market upmoves.
Downside capture is well below 50%, providing a defensive buffer during declines.
The capture ratio of 3.05 signals that the stock captures three times more upside than downside risk.
Performance improves markedly with volatility, as evidenced by the jump from 2.33% to 6.18% average returns between Bull-LowVol and Bull-HighVol regimes.
In Bear-LowVol periods, losses are modest (-2.95%), reinforcing GHM’s defensive profile.

Positive Characteristics
Strong upside capture combined with low downside capture makes GHM attractive in volatile bullish markets.
Defensive characteristics are evident in bear regimes, especially the low downside capture of 33.6%.
Higher returns in high‑volatility bull markets suggest the company can leverage market dynamism for outsized gains.

Investment Highlights & Risk Summary

Graham Corporation (GHM) — Summary & Implications

Graham Corporation delivered an exceptional 1‑year total return of 64.86%, generating an alpha of 47.54% versus the S&P 500 and outpacing its industrials peer group by 46.62%. The upside capture ratio of 102.4% combined with a low downside capture of 33.6% indicates that the stock participates fully in market rallies while limiting losses during downturns, a profile attractive to investors seeking asymmetric returns. However, the benefits are tempered by pronounced risk: annualized volatility stands at 44.56%, well above the S&P 500’s 17.1%, and the historical maximum drawdown of -74.83% signals exposure to severe capital erosion. The Sharpe ratio of 0.407 and Sortino of 0.614 suggest modest risk‑adjusted performance, meaning that while returns have been high, they come at a significant cost of volatility.

Summary Dashboard

Investment Highlights

1Y total return of 64.86% represents strong absolute performance, delivering an excess return of 47.54% over the S&P 500 benchmark.
Upside capture of 102.4% versus downside capture of only 33.6% yields a capture ratio greater than 3:1, highlighting asymmetric upside potential with limited downside exposure.
Sector beta of 0.901 and overall beta of 0.911 indicate the stock moves slightly less than the broader market, providing modest defensive characteristics in volatile environments.
Outperformance of sector peers is evident with a sector alpha of 46.62% versus the XLI industrials ETF.

Risk-Return Rankings

GHM ELEVATED

High-return, high‑volatility profile with strong upside capture but deep drawdown risk.

Strength: Exceptional 1Y return and asymmetric capture (102.4% upside / 33.6% downside).

Concern: Maximum historical drawdown of -74.83% and volatility of 44.56%.

Key Takeaways

Graham Corporation’s returns far exceed market and sector benchmarks, driven by strong price appreciation.
The stock’s upside capture exceeds the market while downside capture remains low, creating an attractive risk‑reward asymmetry.
Elevated volatility and a historic -74.8% drawdown flag significant capital loss potential, demanding careful position sizing.
Risk‑adjusted metrics (Sharpe 0.407) are modest, indicating that excess returns come with considerable risk.

PORTFOLIO IMPLICATIONS

For portfolios seeking high return potential, Graham Corporation can serve as an opportunistic growth tilt within the industrials space, especially when paired with lower‑beta, low‑volatility holdings to dampen overall portfolio volatility. Investors should limit exposure size and consider stop‑loss or hedging strategies to mitigate the impact of extreme drawdowns, ensuring that the asymmetric upside does not overwhelm the portfolio’s risk tolerance.

GHM

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Report written 2026-07-31 • Finexus

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis is based on publicly available data from sources believed to be reliable, but Finexus does not guarantee its accuracy, completeness, or timeliness. Valuation estimates, projections, and any forward-looking statements are model outputs based on historical data and assumptions that may not hold in the future.

Past performance is not indicative of future results. Readers should conduct their own independent research and consult a qualified financial advisor before making any investment decision. Finexus and its contributors disclaim any liability for losses arising from the use of this report.