Correlation Between Global Industrial and EVI Industries

Can any of the company-specific risk be diversified away by investing in both Global Industrial and EVI 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 Global Industrial and EVI Industries 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 EVI Industries, you can compare the effects of market volatilities on Global Industrial and EVI 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 Global Industrial with a short position of EVI Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Industrial and EVI Industries.

Diversification Opportunities for Global Industrial and EVI Industries

-0.16

Correlation Coefficient

Global Industrial  EVI Industries

Good diversification

The 3 months correlation between Global and EVI is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Global Industrial Co and EVI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVI Industries 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 EVI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVI Industries has no effect on the direction of Global Industrial i.e., Global Industrial and EVI Industries go up and down completely randomly.

Pair Corralation between Global Industrial and EVI Industries

Considering the 90-day investment horizon Global Industrial Co is expected to under-perform the EVI Industries. In addition to that, Global Industrial is 1.26 times more volatile than EVI Industries. It trades about -0.09 of its total potential returns per unit of risk. EVI Industries is currently generating about -0.05 per unit of volatility. If you would invest  2,024  in EVI Industries on August 30, 2024 and sell it today you would lose (118.00) from holding EVI Industries or give up 5.83% of portfolio value over 90 days.

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

Global Industrial Co  vs.  EVI Industries

Global Industrial

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

EVI Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EVI Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, EVI Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Industrial and EVI Industries

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

The idea behind Global Industrial Co and EVI 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.