Correlation Between DXP Enterprises and WW Grainger

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

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

Diversification Opportunities for DXP Enterprises and WW Grainger

0.38

Correlation Coefficient

DXP Enterprises  WW Grainger

Weak diversification

The 3 months correlation between DXP and GWW is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with WW Grainger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW Grainger has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and WW Grainger go up and down completely randomly.

Pair Corralation between DXP Enterprises and WW Grainger

Given the investment horizon of 90 days DXP Enterprises is expected to generate 2.62 times more return on investment than WW Grainger. However, DXP Enterprises is 2.62 times more volatile than WW Grainger. It trades about 0.05 of its potential returns per unit of risk. WW Grainger is currently generating about -0.11 per unit of risk. If you would invest  8,332  in DXP Enterprises on December 26, 2024 and sell it today you would earn a total of  508.00  from holding DXP Enterprises or generate 6.1% return on investment over 90 days.

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

DXP Enterprises  vs.  WW Grainger

DXP Enterprises

Risk-Adjusted Performance

Insignificant

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

WW Grainger

Risk-Adjusted Performance

Very Weak

Over the last 90 days WW Grainger has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with DXP Enterprises and WW Grainger

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

The idea behind DXP Enterprises and WW Grainger 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.