Correlation Between WW Grainger and Core Main

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

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

Diversification Opportunities for WW Grainger and Core Main

0.75

Correlation Coefficient

WW Grainger  Core Main

Poor diversification

The 3 months correlation between GWW and Core is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Core Main in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Main 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 Core Main. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Main has no effect on the direction of WW Grainger i.e., WW Grainger and Core Main go up and down completely randomly.

Pair Corralation between WW Grainger and Core Main

Considering the 90-day investment horizon WW Grainger is expected to under-perform the Core Main. But the stock apears to be less risky and, when comparing its historical volatility, WW Grainger is 1.26 times less risky than Core Main. The stock trades about -0.11 of its potential returns per unit of risk. The Core Main is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,160  in Core Main on December 26, 2024 and sell it today you would lose (208.00) from holding Core Main or give up 4.03% of portfolio value over 90 days.

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

WW Grainger  vs.  Core Main

WW Grainger

Risk-Adjusted Performance

Very Weak

Over the last 90 days WW Grainger has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Core Main

Risk-Adjusted Performance

Very Weak

Over the last 90 days Core Main has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Core Main is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with WW Grainger and Core Main

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

The idea behind WW Grainger and Core Main 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.

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.