Correlation Between Graco and XCHG Limited

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

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

Diversification Opportunities for Graco and XCHG Limited

0.13

Correlation Coefficient

Graco  XCHG Limited

Average diversification

The 3 months correlation between Graco and XCHG is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Graco Inc and XCHG Limited American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XCHG Limited American 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 XCHG Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XCHG Limited American has no effect on the direction of Graco i.e., Graco and XCHG Limited go up and down completely randomly.

Pair Corralation between Graco and XCHG Limited

Considering the 90-day investment horizon Graco Inc is expected to generate 0.04 times more return on investment than XCHG Limited. However, Graco Inc is 23.18 times less risky than XCHG Limited. It trades about -0.42 of its potential returns per unit of risk. XCHG Limited American is currently generating about -0.17 per unit of risk. If you would invest  9,039  in Graco Inc on October 9, 2024 and sell it today you would lose (734.00) from holding Graco Inc or give up 8.12% of portfolio value over 90 days.

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

Graco Inc  vs.  XCHG Limited American

Graco Inc

Risk-Adjusted Performance

0 of 100

Very 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.

XCHG Limited American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XCHG Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, XCHG Limited is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Graco and XCHG Limited

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

The idea behind Graco Inc and XCHG Limited American 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.