Correlation Between Core Main and Applied Industrial

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

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

Diversification Opportunities for Core Main and Applied Industrial

-0.03

Correlation Coefficient

Core Main  Applied Industrial

Good diversification

The 3 months correlation between Core and Applied is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Core Main and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial and Core Main 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 Core Main are associated (or correlated) with Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of Core Main i.e., Core Main and Applied Industrial go up and down completely randomly.

Pair Corralation between Core Main and Applied Industrial

Considering the 90-day investment horizon Core Main is expected to under-perform the Applied Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Core Main is 1.47 times less risky than Applied Industrial. The stock trades about -0.33 of its potential returns per unit of risk. The Applied Industrial Technologies is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  25,086  in Applied Industrial Technologies on November 28, 2024 and sell it today you would lose (578.00) from holding Applied Industrial Technologies or give up 2.3% of portfolio value over 90 days.

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

Core Main  vs.  Applied Industrial Technologie

Core Main

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Core Main are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Core Main may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 latest unfluctuating performance, the Stock's forward indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Core Main and Applied Industrial

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

The idea behind Core Main and Applied Industrial Technologies 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.