Correlation Between WW Grainger and WESCO International

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

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

Diversification Opportunities for WW Grainger and WESCO International

0.68

Correlation Coefficient

WW Grainger  WESCO International

Poor diversification

The 3 months correlation between GWW and WESCO is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and WESCO International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESCO International 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 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 WW Grainger i.e., WW Grainger and WESCO International go up and down completely randomly.

Pair Corralation between WW Grainger and WESCO International

Considering the 90-day investment horizon WW Grainger is expected to under-perform the WESCO International. But the stock apears to be less risky and, when comparing its historical volatility, WW Grainger is 1.97 times less risky than WESCO International. The stock trades about -0.11 of its potential returns per unit of risk. The WESCO International is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  17,951  in WESCO International on December 26, 2024 and sell it today you would lose (1,419) from holding WESCO International or give up 7.9% 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.  WESCO International

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.

WESCO International

Risk-Adjusted Performance

Very Weak

Over the last 90 days WESCO International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with WW Grainger and WESCO International

The main advantage of trading using opposite WW Grainger and WESCO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger 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 WW Grainger 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.