Correlation Between CSW Industrials and Graham

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

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

Diversification Opportunities for CSW Industrials and Graham

0.84

Correlation Coefficient

CSW Industrials  Graham

Very poor diversification

The 3 months correlation between CSW and Graham is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CSW Industrials and Graham in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graham and CSW Industrials 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 CSW Industrials are associated (or correlated) with Graham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graham has no effect on the direction of CSW Industrials i.e., CSW Industrials and Graham go up and down completely randomly.

Pair Corralation between CSW Industrials and Graham

Given the investment horizon of 90 days CSW Industrials is expected to generate 0.47 times more return on investment than Graham. However, CSW Industrials is 2.13 times less risky than Graham. It trades about -0.15 of its potential returns per unit of risk. Graham is currently generating about -0.13 per unit of risk. If you would invest  36,340  in CSW Industrials on December 26, 2024 and sell it today you would lose (5,660) from holding CSW Industrials or give up 15.58% of portfolio value over 90 days.

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

CSW Industrials  vs.  Graham

CSW Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSW Industrials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Graham

Risk-Adjusted Performance

Very Weak

Over the last 90 days Graham has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CSW Industrials and Graham

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

The idea behind CSW Industrials and Graham 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.