Correlation Between Smith AO and Graco

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

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

Diversification Opportunities for Smith AO and Graco

-0.21

Correlation Coefficient

Smith AO  Graco

Very good diversification

The 3 months correlation between Smith and Graco is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Smith AO and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc and Smith AO 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 Smith AO are associated (or correlated) with Graco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graco Inc has no effect on the direction of Smith AO i.e., Smith AO and Graco go up and down completely randomly.

Pair Corralation between Smith AO and Graco

Considering the 90-day investment horizon Smith AO is expected to under-perform the Graco. In addition to that, Smith AO is 1.29 times more volatile than Graco Inc. It trades about -0.08 of its total potential returns per unit of risk. Graco Inc is currently generating about 0.15 per unit of volatility. If you would invest  8,140  in Graco Inc on September 1, 2024 and sell it today you would earn a total of  968.00  from holding Graco Inc or generate 11.89% return on investment over 90 days.

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

Smith AO  vs.  Graco Inc

Smith AO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smith AO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Graco Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Graco may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Smith AO and Graco

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

The idea behind Smith AO and Graco Inc 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.