Correlation Between Applied Industrial and Core Main

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

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

Diversification Opportunities for Applied Industrial and Core Main

0.9

Correlation Coefficient

Applied Industrial  Core Main

Almost no diversification

The 3 months correlation between Applied and Core is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Applied Industrial Technologie and Core Main in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Main and Applied Industrial 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 Applied Industrial Technologies are associated (or correlated) with Core Main. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Main has no effect on the direction of Applied Industrial i.e., Applied Industrial and Core Main go up and down completely randomly.

Pair Corralation between Applied Industrial and Core Main

Considering the 90-day investment horizon Applied Industrial Technologies is expected to generate 1.2 times more return on investment than Core Main. However, Applied Industrial is 1.2 times more volatile than Core Main. It trades about -0.01 of its potential returns per unit of risk. Core Main is currently generating about -0.02 per unit of risk. If you would invest  23,824  in Applied Industrial Technologies on December 28, 2024 and sell it today you would lose (602.00) from holding Applied Industrial Technologies or give up 2.53% of portfolio value over 90 days.

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

Applied Industrial Technologie  vs.  Core Main

Applied Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Industrial Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Applied Industrial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Core Main

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Applied Industrial and Core Main

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

The idea behind Applied Industrial Technologies and Core Main 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.