Correlation Between Global Industrial and WESCO International

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

Diversification Opportunities for Global Industrial and WESCO International

-0.74

Correlation Coefficient

Global Industrial  WESCO International

Pay attention - limited upside

The 3 months correlation between Global and WESCO is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Global Industrial Co and WESCO International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESCO International 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 WESCO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESCO International has no effect on the direction of Global Industrial i.e., Global Industrial and WESCO International go up and down completely randomly.

Pair Corralation between Global Industrial and WESCO International

Considering the 90-day investment horizon Global Industrial Co is expected to under-perform the WESCO International. In addition to that, Global Industrial is 12.26 times more volatile than WESCO International. It trades about -0.07 of its total potential returns per unit of risk. WESCO International is currently generating about 0.17 per unit of volatility. If you would invest  2,490  in WESCO International on December 29, 2024 and sell it today you would earn a total of  37.00  from holding WESCO International or generate 1.49% return on investment over 90 days.

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

Global Industrial Co  vs.  WESCO International

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 latest unsteady 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.

WESCO International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WESCO International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, WESCO International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Industrial and WESCO International

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

The idea behind Global Industrial Co and WESCO International 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.