Correlation Between Graco and Enpro Industries

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

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

Diversification Opportunities for Graco and Enpro Industries

0.65

Correlation Coefficient

Graco  Enpro Industries

Poor diversification

The 3 months correlation between Graco and Enpro is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Graco Inc and Enpro Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enpro Industries 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 Enpro Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enpro Industries has no effect on the direction of Graco i.e., Graco and Enpro Industries go up and down completely randomly.

Pair Corralation between Graco and Enpro Industries

Considering the 90-day investment horizon Graco is expected to generate 1.42 times less return on investment than Enpro Industries. But when comparing it to its historical volatility, Graco Inc is 1.67 times less risky than Enpro Industries. It trades about 0.02 of its potential returns per unit of risk. Enpro Industries is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17,323  in Enpro Industries on December 27, 2024 and sell it today you would earn a total of  114.00  from holding Enpro Industries or generate 0.66% return on investment over 90 days.

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

Graco Inc  vs.  Enpro Industries

Graco Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Enpro Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enpro Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Enpro Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Graco and Enpro Industries

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

The idea behind Graco Inc and Enpro Industries 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.