Correlation Between EVI Industries and Global Industrial

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

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

Diversification Opportunities for EVI Industries and Global Industrial

0.85

Correlation Coefficient

EVI Industries  Global Industrial

Very poor diversification

The 3 months correlation between EVI and Global is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding EVI Industries and Global Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Industrial and EVI Industries 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 EVI Industries are associated (or correlated) with Global Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Industrial has no effect on the direction of EVI Industries i.e., EVI Industries and Global Industrial go up and down completely randomly.

Pair Corralation between EVI Industries and Global Industrial

Considering the 90-day investment horizon EVI Industries is expected to generate 2.11 times more return on investment than Global Industrial. However, EVI Industries is 2.11 times more volatile than Global Industrial Co. It trades about -0.01 of its potential returns per unit of risk. Global Industrial Co is currently generating about -0.17 per unit of risk. If you would invest  1,782  in EVI Industries on November 29, 2024 and sell it today you would lose (33.00) from holding EVI Industries or give up 1.85% of portfolio value over 90 days.

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

EVI Industries  vs.  Global Industrial Co

EVI Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days EVI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Global Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Industrial Co 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 forward indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with EVI Industries and Global Industrial

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

The idea behind EVI Industries and Global Industrial Co 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.