Correlation Between WW Grainger and Titan Machinery
Can any of the company-specific risk be diversified away by investing in both WW Grainger and Titan Machinery 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 WW Grainger and Titan Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WW Grainger and Titan Machinery, you can compare the effects of market volatilities on WW Grainger and Titan Machinery 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 WW Grainger with a short position of Titan Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW Grainger and Titan Machinery.
Diversification Opportunities for WW Grainger and Titan Machinery
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GWW and Titan is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Titan Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Machinery and WW Grainger 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 WW Grainger are associated (or correlated) with Titan Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Machinery has no effect on the direction of WW Grainger i.e., WW Grainger and Titan Machinery go up and down completely randomly.
Pair Corralation between WW Grainger and Titan Machinery
Assuming the 90 days horizon WW Grainger is expected to generate 0.41 times more return on investment than Titan Machinery. However, WW Grainger is 2.43 times less risky than Titan Machinery. It trades about 0.09 of its potential returns per unit of risk. Titan Machinery is currently generating about -0.06 per unit of risk. If you would invest 75,287 in WW Grainger on September 25, 2024 and sell it today you would earn a total of 28,163 from holding WW Grainger or generate 37.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
WW Grainger vs. Titan Machinery
Performance |
Timeline |
WW Grainger |
Titan Machinery |
WW Grainger and Titan Machinery Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with WW Grainger and Titan Machinery
The main advantage of trading using opposite WW Grainger and Titan Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger position performs unexpectedly, Titan Machinery 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 Titan Machinery will offset losses from the drop in Titan Machinery's long position.WW Grainger vs. TITANIUM TRANSPORTGROUP | WW Grainger vs. USWE SPORTS AB | WW Grainger vs. SINGAPORE AIRLINES | WW Grainger vs. ANTA SPORTS PRODUCT |
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Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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