Correlation Between Grand Canyon and Whirlpool

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

By analyzing existing cross correlation between Grand Canyon Education and Whirlpool, you can compare the effects of market volatilities on Grand Canyon and Whirlpool 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 Grand Canyon with a short position of Whirlpool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Canyon and Whirlpool.

Diversification Opportunities for Grand Canyon and Whirlpool

0.22

Correlation Coefficient

Grand Canyon  Whirlpool

Modest diversification

The 3 months correlation between Grand and Whirlpool is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Grand Canyon Education and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool and Grand Canyon 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 Grand Canyon Education are associated (or correlated) with Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of Grand Canyon i.e., Grand Canyon and Whirlpool go up and down completely randomly.

Pair Corralation between Grand Canyon and Whirlpool

Assuming the 90 days trading horizon Grand Canyon is expected to generate 2.48 times less return on investment than Whirlpool. But when comparing it to its historical volatility, Grand Canyon Education is 1.42 times less risky than Whirlpool. It trades about 0.23 of its potential returns per unit of risk. Whirlpool is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  10,970  in Whirlpool on October 24, 2024 and sell it today you would earn a total of  1,680  from holding Whirlpool or generate 15.31% return on investment over 90 days.

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

Grand Canyon Education  vs.  Whirlpool

Grand Canyon Education

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grand Canyon Education are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grand Canyon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Whirlpool

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Whirlpool are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Whirlpool reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grand Canyon and Whirlpool

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

The idea behind Grand Canyon Education and Whirlpool 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.