Correlation Between Indutrade and WW Grainger

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

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

Diversification Opportunities for Indutrade and WW Grainger

-0.63

Correlation Coefficient

Indutrade  WW Grainger

Excellent diversification

The 3 months correlation between Indutrade and GWW is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger and Indutrade 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 Indutrade AB are associated (or correlated) with WW Grainger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW Grainger has no effect on the direction of Indutrade i.e., Indutrade and WW Grainger go up and down completely randomly.

Pair Corralation between Indutrade and WW Grainger

Assuming the 90 days horizon Indutrade AB is expected to under-perform the WW Grainger. But the stock apears to be less risky and, when comparing its historical volatility, Indutrade AB is 1.17 times less risky than WW Grainger. The stock trades about -0.13 of its potential returns per unit of risk. The WW Grainger is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  100,362  in WW Grainger on October 15, 2024 and sell it today you would earn a total of  3,188  from holding WW Grainger or generate 3.18% return on investment over 90 days.

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

Indutrade AB  vs.  WW Grainger

Indutrade AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indutrade AB 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.

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.

Pair Trading with Indutrade and WW Grainger

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

The idea behind Indutrade AB and WW Grainger 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.