Correlation Between Graco and Gorman Rupp

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

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

Diversification Opportunities for Graco and Gorman Rupp

0.6

Correlation Coefficient

Graco  Gorman Rupp

Poor diversification

The 3 months correlation between Graco and Gorman is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Graco Inc and Gorman Rupp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gorman Rupp and Graco 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 Graco Inc are associated (or correlated) with Gorman Rupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gorman Rupp has no effect on the direction of Graco i.e., Graco and Gorman Rupp go up and down completely randomly.

Pair Corralation between Graco and Gorman Rupp

Considering the 90-day investment horizon Graco Inc is expected to generate 0.76 times more return on investment than Gorman Rupp. However, Graco Inc is 1.32 times less risky than Gorman Rupp. It trades about 0.0 of its potential returns per unit of risk. Gorman Rupp is currently generating about -0.06 per unit of risk. If you would invest  8,350  in Graco Inc on December 29, 2024 and sell it today you would lose (8.00) from holding Graco Inc or give up 0.1% of portfolio value over 90 days.

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

Graco Inc  vs.  Gorman Rupp

Graco Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Graco Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Graco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Gorman Rupp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gorman Rupp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Gorman Rupp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Graco and Gorman Rupp

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

The idea behind Graco Inc and Gorman Rupp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..