Correlation Between WW Grainger and RATIONAL UNADR

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

By analyzing existing cross correlation between WW Grainger and RATIONAL UNADR 1, you can compare the effects of market volatilities on WW Grainger and RATIONAL UNADR 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 RATIONAL UNADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW Grainger and RATIONAL UNADR.

Diversification Opportunities for WW Grainger and RATIONAL UNADR

-0.14

Correlation Coefficient

WW Grainger  RATIONAL UNADR

Good diversification

The 3 months correlation between GWW and RATIONAL is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and RATIONAL UNADR 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RATIONAL UNADR 1 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 RATIONAL UNADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RATIONAL UNADR 1 has no effect on the direction of WW Grainger i.e., WW Grainger and RATIONAL UNADR go up and down completely randomly.

Pair Corralation between WW Grainger and RATIONAL UNADR

Assuming the 90 days horizon WW Grainger is expected to under-perform the RATIONAL UNADR. But the stock apears to be less risky and, when comparing its historical volatility, WW Grainger is 1.39 times less risky than RATIONAL UNADR. The stock trades about -0.25 of its potential returns per unit of risk. The RATIONAL UNADR 1 is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  4,060  in RATIONAL UNADR 1 on October 15, 2024 and sell it today you would lose (100.00) from holding RATIONAL UNADR 1 or give up 2.46% of portfolio value over 90 days.

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

WW Grainger  vs.  RATIONAL UNADR 1

WW Grainger

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, WW Grainger is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

RATIONAL UNADR 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RATIONAL UNADR 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with WW Grainger and RATIONAL UNADR

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

The idea behind WW Grainger and RATIONAL UNADR 1 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.