Correlation Between Global Industrial and Core Main

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

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

Diversification Opportunities for Global Industrial and Core Main

0.7

Correlation Coefficient

Global Industrial  Core Main

Poor diversification

The 3 months correlation between Global and Core is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global Industrial Co and Core Main in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Main and Global Industrial 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 Global Industrial Co are associated (or correlated) with Core Main. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Main has no effect on the direction of Global Industrial i.e., Global Industrial and Core Main go up and down completely randomly.

Pair Corralation between Global Industrial and Core Main

Considering the 90-day investment horizon Global Industrial Co is expected to under-perform the Core Main. In addition to that, Global Industrial is 1.05 times more volatile than Core Main. It trades about -0.05 of its total potential returns per unit of risk. Core Main is currently generating about -0.03 per unit of volatility. If you would invest  5,103  in Core Main on December 27, 2024 and sell it today you would lose (163.00) from holding Core Main or give up 3.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Global Industrial Co  vs.  Core Main

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 rather sound forward indicators, Global Industrial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Core Main

Risk-Adjusted Performance

Very Weak

Over the last 90 days Core Main has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Core Main is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global Industrial and Core Main

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

The idea behind Global Industrial Co and Core Main 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.