Correlation Between International Consolidated and WW Grainger

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

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

Diversification Opportunities for International Consolidated and WW Grainger

0.38

Correlation Coefficient

International Consolidated  WW Grainger

Weak diversification

The 3 months correlation between International and GWW is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger and International Consolidated 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 International Consolidated Airlines 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 International Consolidated i.e., International Consolidated and WW Grainger go up and down completely randomly.

Pair Corralation between International Consolidated and WW Grainger

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.52 times more return on investment than WW Grainger. However, International Consolidated is 1.52 times more volatile than WW Grainger. It trades about -0.03 of its potential returns per unit of risk. WW Grainger is currently generating about -0.14 per unit of risk. If you would invest  370.00  in International Consolidated Airlines on December 21, 2024 and sell it today you would lose (23.00) from holding International Consolidated Airlines or give up 6.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

International Consolidated Air  vs.  WW Grainger

International Consolidated

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Consolidated Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, International Consolidated is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with International Consolidated and WW Grainger

The main advantage of trading using opposite International Consolidated and WW Grainger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Consolidated 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 International Consolidated Airlines 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.