Correlation Between RETAIL FOOD and Sherwin Williams

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

By analyzing existing cross correlation between RETAIL FOOD GROUP and The Sherwin Williams, you can compare the effects of market volatilities on RETAIL FOOD and Sherwin Williams 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 RETAIL FOOD with a short position of Sherwin Williams. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and Sherwin Williams.

Diversification Opportunities for RETAIL FOOD and Sherwin Williams

0.7

Correlation Coefficient

RETAIL FOOD  Sherwin Williams

Poor diversification

The 3 months correlation between RETAIL and Sherwin is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and The Sherwin Williams in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin Williams and RETAIL FOOD 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 RETAIL FOOD GROUP are associated (or correlated) with Sherwin Williams. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherwin Williams has no effect on the direction of RETAIL FOOD i.e., RETAIL FOOD and Sherwin Williams go up and down completely randomly.

Pair Corralation between RETAIL FOOD and Sherwin Williams

Assuming the 90 days trading horizon RETAIL FOOD is expected to generate 1.83 times less return on investment than Sherwin Williams. But when comparing it to its historical volatility, RETAIL FOOD GROUP is 1.07 times less risky than Sherwin Williams. It trades about 0.07 of its potential returns per unit of risk. The Sherwin Williams is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  32,532  in The Sherwin Williams on September 5, 2024 and sell it today you would earn a total of  5,033  from holding The Sherwin Williams or generate 15.47% return on investment over 90 days.

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

RETAIL FOOD GROUP  vs.  The Sherwin Williams

RETAIL FOOD GROUP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RETAIL FOOD GROUP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, RETAIL FOOD may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sherwin Williams

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Sherwin Williams are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sherwin Williams reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RETAIL FOOD and Sherwin Williams

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

The idea behind RETAIL FOOD GROUP and The Sherwin Williams 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.