Correlation Between ITT and Graco

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

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

Diversification Opportunities for ITT and Graco

0.89

Correlation Coefficient

ITT  Graco

Very poor diversification

The 3 months correlation between ITT and Graco is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ITT Inc and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc and ITT 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 ITT Inc are associated (or correlated) with Graco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graco Inc has no effect on the direction of ITT i.e., ITT and Graco go up and down completely randomly.

Pair Corralation between ITT and Graco

Considering the 90-day investment horizon ITT Inc is expected to under-perform the Graco. In addition to that, ITT is 1.25 times more volatile than Graco Inc. It trades about -0.03 of its total potential returns per unit of risk. Graco Inc is currently generating about -0.02 per unit of volatility. If you would invest  8,755  in Graco Inc on November 19, 2024 and sell it today you would lose (175.00) from holding Graco Inc or give up 2.0% of portfolio value over 90 days.

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

ITT Inc  vs.  Graco Inc

ITT Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ITT is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Graco Inc

Risk-Adjusted Performance

Very Weak

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

Pair Trading with ITT and Graco

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

The idea behind ITT Inc and Graco Inc 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.